Compensation - FCA Handbook · COMP Contents Compensation COMP INTRO B Introduction 1B INTRO 1B...

Compensation

COMP Contents

Compensation

COMP INTROA INTRO 1

INTRO 1 Foreword

COMP 1 Introduction and Overview

1.1 Application, Introduction, and Purpose1.2 The FSCS1.3 Claimants1.4 EEA Firms [deleted]1.5 Application to Lloyd's1.6 Cooperation with the FSCS

COMP 2 The FSCS

2.1 Application and Purpose2.2 Duties of the FSCS

COMP 3 The qualifying conditions for compensation

3.1 Application and Purpose3.2 The qualifying conditions for paying compensation

COMP 4 Eligible claimants

4.1 Application and Purpose4.2 Who is eligible to benefit from the protection provided by the FSCS?4.3 Exceptions: Circumstances where a person coming within COMP 4.2.2R

may receive compensation4.4 Exceptions: Relevant general insurance contracts: mesothelioma claims

COMP 5 Protected claims

5.1 Application and Purpose5.2 What is a protected claim?5.5 Protected investment business5.6 Protected home finance mediation5.7 Protected non-investment insurance mediation5.8 Protected debt management business

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COMP Contents

COMP 6 Relevant persons and successors in default

6.1 Application and Purpose6.2 Who is a relevant person?6.3 When is a relevant person in default?6.3A When is a successor in default?

COMP 7 Assignment or subrogation of rights

7.1 Application7.2 How does the assignment of rights work?7.3 Automatic subrogation7.4 Duty on FSCS to pursue recoveries7.6 Treatment of recoveries

COMP 8 Rejection of application and withdrawal of offer

8.1 Application and Purpose8.2 Rejection of application for compensation8.3 Withdrawal of offer of compensation

COMP 9 Time limits on payment and postponing payment

9.1 Application and Purpose9.2 When must compensation be paid?

COMP 10 Limits on the amount of compensation payable

10.1 Application and Purpose10.2 Limits on compensation payable

COMP 11 Payment of compensation

11.1 Application and Purpose11.2 Payment

COMP 12 Calculating compensation

12.1 Application and Purpose12.2 Quantification: general12.3 Quantification date12.4 The compensation calculation12.5 [deleted]12.6 Quantification: trustees, operators of pension schemes, persons winding

up pension schemes, personal representatives, agents, and joint claims

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COMP Contents

COMP 12A Special cases

12A.1 Trustees and pension schemes12A.2 Personal representatives, agents and joint claims12A.3 Collective investment schemes12A.4 Foreign law12A.5 Claims arising under COMP 3.2.4R

COMP 13 Funding

13 Ann 1 [deleted: the provisions in relation to the funding of the FinancialServices Compensation Scheme are set out in FEES 6 (Financial ServicesCompensation Scheme Funding)]

COMP 14 Participation by EEA Firms

14.1 Application and Purpose14.2 Obtaining top-up cover14.3 Co-operation between the FSCS and Home State compensation schemes14.4 Ending top-up cover14.5 EEA UCITS management companies

Transitional provisions and Schedules

TP 1 Transitional ProvisionsSch 1 Record-keeping requirementsSch 2 Notification requirementsSch 3 Fees and other required paymentsSch 4 Powers ExercisedSch 5 Rights of action for damagesSch 6 Rules that can be waived

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Compensation

Chapter INTRO

INTRO 1

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COMP INTRO A : INTRO 1 Section INTRO 1 : Foreword

INTRO

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INTRO 1 Foreword

(This Foreword to the Compensation sourcebook does not form part ofCOMP.)

The Act requires the FCA and the PRA to make rules establishing a schemefor compensating consumers in cases where: (i) relevant persons are unable,or likely to be unable, to satisfy claims against them; or (ii) persons who haveassumed responsibility for liabilities arising from acts or omissions ofauthorised firms (“successors”) are unable, or likely to be unable, to satisfyclaims against the successors that are based on those acts or omissions. Thebody established to operate and administer the compensation scheme is theFinancial Services Compensation Scheme Limited (FSCS). The PRA’scompensation rules deal with claims for deposits and under contracts ofinsurance and the FCA’s compensation rules deal with other types of claim.

By making rules that allow the FSCS to pay compensation to retail consumersand small businesses, and focusing protection on those who need it most,the compensation scheme rules form an important part of the toolkit theFCA will use to meet its statutory objectives. This module of the FCAHandbook contains the rules and guidance that allow the FSCS to pay claimsfor compensation when an authorised person or, where applicable, asuccessor, is unable or likely to be unable to meet claims against it. The rulesspecify who is eligible to receive compensation and in what circumstances,how much compensation can be paid to a claimant; and how the scheme willbe funded. The compensation rules are of interest to consumers. The rulesapply to the FSCS, authorised firms and successors.

The Sourcebook is divided into the following Chapters covering all aspects ofthe scheme:

Chapter 1: Introduction and Overview

This chapter provides an introduction to the FSCS rules and a table ofquestion and answers that may be of interest to consumers.

Chapter 2: The FSCS

This chapter gives the FSCS the duty to administer the compensation scheme.It also sets out the general conditions the FSCS must follow whenadministering the scheme, such as having regard to the efficient andeconomic use of resources, the requirement to publish an Annual Report,and the duty to ensure consumers are informed about how they can make aclaim. The rules in this chapter also require the FSCS to have in placeprocedures for dealing with complaints.


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Chapter 3 The qualifying conditions for paying compensation

This chapter sets out the main qualifying conditions that must be satisfiedbefore the FSCS can pay compensation to claimants. These are that aclaimant is eligible to claim; the activity that gave rise to the loss is protectedby the scheme; the firm against which the claim is being made is protectedby the scheme; and that the claimant has assigned his rights to the scheme.Chapters 4 to 7 expand on the general conditions described in Chapter 3.

Chapter 4 Eligible claimants

This chapter specifies who is eligible to receive compensation provided bythe FSCS.

Chapter 5 What is a protected claim?

This chapter specifies the activities that are protected by the FSCS.

Chapter 6 Relevant persons and successors in default

This chapter specifies the circumstances when a firm is in default, that is,when a firm is to be taken as being unable or likely to be unable to meetclaims against it. The FSCS can only pay compensation if the circumstancesspecified in Chapter 6 are met.

Chapter 7 Assignment of rights

This chapter enables the FSCS to make an offer of compensation conditionalon the claimant assigning to it their rights to claim against the failed firm. Ifthe FSCS recovers from the firm a greater sum than it has paid to theclaimant, it must pay the balance to the claimant.

Chapter 8 Rejection of application and withdrawal of offer

This chapter allows the FSCS to reject an application for compensation orwithdraw an offer of compensation in specified circumstances.

Chapter 9 Time limits on payment and postponing payment

This chapter requires the FSCS to pay a claim for compensation within aspecified time unless specified conditions apply.

Chapter 10 Limits on the amount of compensation payable

This chapter specifies the maximum amount of compensation the FSCS canpay to a claimant.

Chapter 11 Payment of compensation

This chapter specifies to whom the FSCS may pay compensation. In certaincircumstances compensation may be paid to a person other than theclaimant.


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Chapter 12 Calculating compensation

This chapter specifies how the FSCS will calculate the amount ofcompensation it can pay to a claimant.

Chapter 13 Funding

Chapter 13 relating to the funding of the FSCS has now been deleted. Thefunding provisions for the FSCS are now contained in FEES 6 instead andallow the FSCS to make levies on authorised firms to fund the operation ofthe scheme or to pay compensation. FEES 6 specifies how FSCS can makelevies, how costs are to be allocated, the maximum the FSCS can levy in anyparticular period of time, and how sums recovered from failed firms are tobe treated.

Chapter 14 Participation by EEA firms

This chapter sets out the way the FSCS deals with incoming EEA firms whomay choose to top-up into the FSCS to supplement the compensationavailable from their home state scheme.

Compensation

Chapter 1

Introduction and Overview

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COMP 1 : Introduction and Section 1.1 : Application, Introduction, andOverview Purpose

1

G1.1.1

G1.1.2

G1.1.3

G1.1.4

G1.1.5

G1.1.6

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1.1 Application, Introduction, andPurpose

Application......................................................................................................This chapter is relevant to:

(1) the FSCS;

(2) eligible claimants;

(3) firms; and

(4) successors.

This sourcebook is principally relevant to the FSCS. It sets out thecircumstances in which compensation may be paid, to whom compensationmay be paid, and on whom the FSCS can impose levies to meet the costs ofpaying compensation (see in particular COMP 3, 4, and ■ FEES 6). It alsodescribes how the FSCS is to calculate compensation in particular cases (see■ COMP 12).

Claimants and their advisers will be particularly interested in the sections ofthis sourcebook which deal with eligibility for claiming compensation, theway that the FSCS calculates compensation, and how they can make a claim.For convenience, the relevant parts of this sourcebook are highlighted in alist of questions and answers in ■ COMP 1.3.3 G.

Firms will be particularly interested in ■ FEES 6, which deals with levies, and■ COMP 1.6.1R, which requires firms to deal with the FSCS in an open,cooperative and timely way.

Introduction......................................................................................................The FSA established the Financial Services Compensation Scheme Limited, acompany limited by guarantee (FSCS). The FSCS exercises the functions thatare conferred on the scheme manager by Part XV of the Act, dealing withcompensation.

The FCA and PRA are also required, under section 213 of the Act (Thecompensation scheme), to make rules establishing a compensation scheme.The FCA’s rules are set out in the remaining chapters of this sourcebook, andare directed to the FSCS, claimants and potential claimants, and firms. ThePRA’s rules dealing with claims for deposits and under contracts of insuranceare set out in the PRA Rulebook.

http://www.legislation.gov.uk/ukpga/2000/8/part/XV/2001-12-01

http://www.legislation.gov.uk/ukpga/2000/8/section/213/2001-12-01

COMP 1 : Introduction and Section 1.1 : Application, Introduction, andOverview Purpose

1G1.1.7

G1.1.8

G1.1.9

G1.1.9A

G1.1.9B

G1.1.10

G1.1.10A

G1.1.10B


Purpose......................................................................................................The FSCS will only pay claims if a firm or a successor is unable or likely to beunable to meet claims against it because of its financial circumstances. If afirm (or, where applicable, a successor) is still trading and has sufficientfinancial resources to satisfy a claim, the firm (or, where applicable, thesuccessor) will be expected to meet the claim itself. This can, for example, bean amount the firm agrees with the claimant, or the amount of anOmbudsman award from the Financial Ombudsman Service.

■ COMP 1 consists of guidance which is aimed at giving an overview of howthis sourcebook works. The provisions of ■ COMP 2 to ■ COMP 14 cover who iseligible, the amount of compensation and how it might be paid.

[deleted]

This sourcebook is one of the means by which the FCA will meet its statutoryobjectives of securing an appropriate degree of protection for consumersand protecting and enhancing the integrity of the UK financial system.

[deleted]

[deleted]

By making rules that allow the FSCS to provide compensation at a levelappropriate for the protection of retail consumers and small businesses, theFCA enables consumers to participate in the financial markets with theconfidence that they will be protected, at least in part, should the relevantperson with whom they are dealing, or a successor, be unable to satisfyclaims against it.

[deleted]

COMP 1 : Introduction and Section 1.2 : The FSCSOverview

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G1.2.1

G1.2.2

G1.2.2A

G1.2.2B


1.2 The FSCS

While this sourcebook deals with the main powers and duties of the FSCS, itdoes not provide the complete picture. Other aspects of the operation of theFSCS are dealt with through the powers of the Financial ServicesCompensation Scheme Limited under company law (such as the power toborrow, to take on premises, etc.).

(1) [deleted]

(2) [deleted]

(1) In addition, the Act itself confers certain powers upon the FSCS, suchas a power under section 219 of the Act (Scheme Manager's powersto require information) to require persons to provide information.These powers are not, therefore, covered by this sourcebook.

(2) Of specific relevance to the way in which the FSCS fulfils itsresponsibilities is the relationship between the FSCS and the FCA. Thisis covered in a Memorandum of Understanding which can be foundon the FCA website http://www.fca.org.uk .

[deleted]


www.fca.org.uk

COMP 1 : Introduction and Section 1.3 : ClaimantsOverview

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G1.3.2

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1.3 Claimants

The FSCS provides information to claimants and potential claimants aboutthe way the FSCS works and the procedures that need to be followed whenmaking a claim. The FSCS can be contacted at Financial ServicesCompensation Scheme, 10th Floor, Beaufort House, 15 St Botolph Street,London EC3A 7QU, or by telephone or fax (Tel: 0800 678 1100 or Fax: 0207741 4100).

Information about the operation of the FSCS and how to claim is alsoavailable from the FSCS website (www.fscs.org.uk).

Areas of particular interest to claimants (see COMP 1.1.3G).

This Table belongs to ■ COMP 1.1.3 G.

What do I need to do in order to receive com-Q1 pensation?

A1 In order to receive compensation:

(-1) If your claim is for a deposit or under acontract of insurance, see the PRA’s De-positor Protection or Policyholder Pro-tection rules;

(1) you must be an eligible claimant; COMP 4.2

(2) you must have a protected claim; COMP 5.2

(3) you must be claiming against a relevant COMP 6.2.1 Rperson or a successor;

(4) where the claim is against a relevant COMP 6.3; COMPperson, the relevant person must be de- 6.3Afault; or where the claim is against asuccessor, the successor must be indefault.

In addition, if the FSCS requires you to do so, COMP 7.2you must assign your legal rights in the claimto the FSCS.

And you must bring your claim to the FSCS COMP 8.2.3 R -within a set time (normally within six years of COMP 8.2.5 Rthe date on which your claim against the relev-ant person occurred).

It is possible, in certain circumstances, for some- COMP 3.2.2 Rone else to make a claim on your behalf.

Q2 How much compensation will I be offered?

This depends on whether your protected claim

COMP 1 : Introduction and Section 1.3 : ClaimantsOverview

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A2 is:

(1) [deleted]

(2) [deleted]

(3) a claim in connection with protected in- COMP 5.5vestment business; or

(4) a claim in connection with protected COMP 5.6home finance mediation; or

(5) a claim in connection with protected COMP 5.7non-investment insurance mediation.

Different limits apply to different types of COMP 10.2.3 Rclaim.

How will the FSCS calculate the compensationQ3 that is offered to me?

Again, this will depend on whether your pro-A3 tected claim is:

(1) [deleted]

(2) [deleted]

(3) a claim in connection with protected in- COMP 12.2.1 R,vestment business; or COMP 12.3.5 R

and COMP 12.4.2R

(4) a claim in connection with protected COMP 12.4.17 Rhome finance mediation; or

(5) a claim in connection with protected COMP 12.4.20 Rnon-investment insurance mediation.

Certain types of protected investment business COMP 12.4.5 Rclaim require the FSCS to use a particularmethod of calculation.

Q4 [deleted]

COMP 1 : Introduction and Section 1.4 : EEA Firms [deleted]Overview

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1.4


1.4 EEA Firms [deleted]

COMP 1 : Introduction and Section 1.5 : Application to Lloyd'sOverview

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R1.5.8

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1.5 Application to Lloyd's

Compensation arrangements for individual members......................................................................................................The compensation scheme will not compensate members or former membersif firms are unable to satisfy claims made in connection with regulatedactivities relating to their participation in Lloyd's syndicates. Separate rulesand guidance are therefore needed.

The Society must maintain byelaws establishing appropriate and effectivearrangements to compensate individual members and former members whowere individual members if underwriting agents are unable, or likely to beunable, to satisfy claims by those members relating to regulated activitiescarried on in connection with their participation in Lloyd's syndicates.

For the purposes of ■ COMP 1.5.8 R "individual member" includes a memberwhich is a limited liability partnership or a body corporate whose membersconsist only of, or of the nominees for, a single natural person or a group ofconnected persons.

The arrangements referred to in ■ COMP 1.5.8 R:

(1) will not compensate losses arising only as a result of underwriting orinvestment risk to which individual members or former members whowere individual members are or were exposed by their participationin Lloyd's syndicates;

(2) may be restricted to compensation for losses arising out of fraud,dishonesty or failure to account; and

(3) should cover all regulated activities carried on by underwriting agentsrelating to Lloyd's syndicate capacity and syndicate membership.

The arrangements referred to in ■ COMP 1.5.8 R should have a governancestructure that is operationally independent from the Society, but which isnevertheless accountable to the Society for the proper administration of thecompensation arrangements.

A contravention of ■ COMP 1.5.8 R does not give rise to a right of action by aprivate person under section 138D of the Act (Actions for damages) and thatrule is specified under Section 138D(3) of the Act as a provision giving rise tono such right of action.

COMP 1 : Introduction and Section 1.6 : Cooperation with the FSCSOverview

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1.6 Cooperation with the FSCS

A firm must deal with the FSCS in an open, cooperative and timely way.

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Compensation

Chapter 2

The FSCS


COMP 2 : The FSCS Section 2.1 : Application and Purpose

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2.1 Application and Purpose

Application......................................................................................................This chapter applies to the FSCS.

Purpose......................................................................................................In order to carry out its functions and put into effect the provisions set out inCOMP 3 - COMP 14 (which deal with determining whether compensation ispayable, calculating the amount of compensation that should be paid, andmaking levies on firms), the FSCS needs to have a variety of powers. Thepurpose of this chapter is to set out these powers, and the restrictions uponthem.

COMP 2 : The FSCS Section 2.2 : Duties of the FSCS

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2.2 Duties of the FSCS

Administering the compensation scheme......................................................................................................The FSCS must administer the compensation scheme in accordance with therules in this sourcebook and any other rules prescribed by law to ensure thatthe compensation scheme is administered in a manner that is procedurallyfair and in accordance with the European Convention on Human Rights.

The FSCS may:

(1) pay compensation to eligible claimants when a relevant person (or,where applicable, a successor) is unable or likely to be unable to meetclaims against it in accordance with this sourcebook; and

(2) make levies on participant firms, in accordance with ■ FEES 6 (FinancialServices Compensation Scheme Funding), to enable it to paycompensation or meet the costs of discharging its functions under thissourcebook.

Information for claimants......................................................................................................The FSCS must publish information for claimants and potential claimants onthe operation of the compensation scheme.

Assistance to claimants......................................................................................................The FSCS may agree to pay the reasonable costs of an eligible claimantbringing or continuing insolvency proceedings against a relevant person or,where applicable, a successor (whether those proceedings began before orafter a determination of default), if the FSCS is satisfied that thoseproceedings would help it to discharge its functions under the requirementsof this sourcebook.

Annual Report......................................................................................................The FSCS must make and publish an annual report on the discharge of itsfunctions (section 218 of the Act (Annual report)).

Finance and resources......................................................................................................The FSCS must have regard to the need to use its resources in the mostefficient and economic way in carrying out its functions under therequirements of this sourcebook.


COMP 2 : The FSCS Section 2.2 : Duties of the FSCS

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Publication of defaults......................................................................................................The FSCS must take appropriate steps to ensure that potential claimants areinformed of how they can make a claim for compensation as soon as possibleafter a determination has been made that a relevant person (or, whereapplicable, a successor) is in default, whether by the FSCS or the FCA.

Complaints......................................................................................................The FSCS must put in place and publish procedures which satisfy theminimum requirements of procedural fairness and comply with the EuropeanConvention on Humans Rights for the handling of any complaints ofmaladministration relating to any aspect of the operation of thecompensation scheme.

Informing the FSCS......................................................................................................The FCA will inform the FSCS if it detects problems in a firm that is likely togive rise to the intervention of the FSCS.

[deleted]

Compensation

Chapter 3

The qualifying conditions forcompensation


COMP 3 : The qualifying Section 3.1 : Application and Purposeconditions for compensation

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G3.1.2

G3.1.3

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It is also relevant to claimants.

Purpose......................................................................................................The purpose of this chapter is to set out in general terms the conditions thatmust be satisfied before the FSCS can make an offer of compensation.

The qualifying conditions for paying compensation are set out in greaterdetail in ■ COMP 4 - ■ COMP 7.

COMP 3 : The qualifying Section 3.2 : The qualifying conditions forconditions for compensation paying compensation

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R3.2.1A

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3.2 The qualifying conditions for payingcompensation

The FSCS may pay compensation to an eligible claimant, subject to COMP 11(Payment of compensation), if it is satisfied that:

(1) an eligible claimant has made an application for compensation (orthe FSCS is treating the person as having done so);

(2) the claim is in respect of a protected claim against a relevant person(or, where applicable, a successor) who is in default; and

(3) where the FSCS so requires, the claimant has assigned the whole orany part of his rights against any one or more of the relevant person,any third party or, where applicable, a successor, to the FSCS, on suchterms as the FSCS thinks fit.

(4) [deleted]

Treating a person as having claimed......................................................................................................The FSCS may treat persons who are or may be entitled to claimcompensation as if they had done so.

Claims on behalf of another person......................................................................................................The FSCS may also pay compensation (and any recovery or other amountpayable by the FSCS to the claimant) to a person who makes a claim onbehalf of another person if the FSCS is satisfied that the person on whosebehalf the claim is made:

(1) is or would have been an eligible claimant; and

(2) would have been paid compensation by the FSCS had he been able tomake the claim himself, or to pursue his application for compensationfurther.

Examples of the circumstances covered by ■ COMP 3.2.2 R are:

(1) when personal representatives make a claim on behalf of thedeceased;

(2) when trustees make a claim on behalf of beneficiaries (for furtherprovisions relating to claims by trustees, see ■ COMP 12A.1.1R to■ 12A.1.7R);

COMP 3 : The qualifying Section 3.2 : The qualifying conditions forconditions for compensation paying compensation

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R3.2.4

G3.2.5


(3) when the donee of an enduring power of attorney or a lasting powerof attorney makes a claim on behalf of the donor of the power;

(4) when the Court of Protection makes a claim on behalf of a personincapable by reason of mental disorder of managing andadministering his property and affairs;

(5) when an eligible claimant makes a claim for compensation but diesbefore his claim is determined.

The FSCS may also pay compensation to a firm, who makes a claim inconnection with protected non-investment insurance mediation on behalf ofits customers, if the FSCS is satisfied that:

(1) each customer has borne a shortfall in client money held by the firmcaused by a secondary pooling event arising out of the failure of abroker or settlement agent which is a relevant person in default;

(2) the customers in respect of which compensation is to be paid satisfythe conditions set out in ■ COMP 3.2.2 R (1);

(3) the customers do not have a claim against the relevant persondirectly, nor a claim against the firm, in respect of the same loss;

(4) the customers would have been paid compensation by FSCS if thecustomers had a claim for their share of the shortfall, and if the firmwere the relevant person; and

(5) the firm has agreed, on such terms as the FSCS thinks fit, to pay, orcredit the accounts of, without deduction, each relevant customer in(1), that part of the compensation equal to the customer's financialloss, subject to the limits in ■ COMP 10.2.

Special cases......................................................................................................See ■ COMP 12A (Special cases) for how the FSCS may pay compensation incertain cases.

Compensation

Chapter 4

Eligible claimants


COMP 4 : Eligible claimants Section 4.1 : Application and Purpose

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R4.1.1

G4.1.2

G4.1.3




It is also relevant to those who may wish to bring a claim for compensation.

Purpose......................................................................................................The purpose of this chapter is to set out the types of person who are able toclaim compensation or benefit from the protection the FSCS is able toprovide. A claimant needs to be an eligible claimant to satisfy COMP3.2.1R(1).

COMP 4 : Eligible claimants Section 4.2 : Who is eligible to benefit fromthe protection provided by the FSCS?

4

R4.2.1

R4.2.2


4.2 Who is eligible to benefit from theprotection provided by the FSCS?

An eligible claimant is any person who at any material time:

(1) did not come within ■ COMP 4.2.2 R; or

(2) did come within ■ COMP 4.2.2 R, but satisfied the relevant exception in■ COMP 4.3 or ■ COMP 4.4.

Persons not eligible to claim unless COMP 4.3 applies (seeCOMP 4.2.1R)......................................................................................................

This table belongs to COMP 4.2.1R

(1) Firms (other than a sole trader firm; a credit union; a trusteeof a stakeholder pension scheme (which is not an occupa-tional pension scheme) or personal pension scheme; a firm car-rying on the regulated activity of operating, or winding up, astakeholder pension scheme (which is not an occupational pen-sion scheme) or personal pension scheme; or a small business;in each case,whose claim arises out of a regulated activity forwhich they do not have a permission)

(2) Overseas financial services institutions

(3) Collective investment schemes, and anyone who is the oper-ator or depositary of such a scheme.

(4) Pension and retirement funds, and anyone who is a trusteeof such a fund. However, this exclusion does not apply to:

(a) a trustee of a personal pension scheme or a stake-holder pension scheme (which is not an occupationalpension scheme); or

(b) a trustee of an occupational pension scheme insofar asmembers’ benefits are money-purchase benefits; or

(c) insofar as members’ benefits are not money-purchasebenefits, a trustee of an occupational pension schemeof an employer which is not a large company, largepartnership or large mutual association.

(5) Supranational institutions, governments, and central adminis-trative authorities

(6) Provincial, regional, local and municipal authorities

(7) Directors of the relevant person in default or, in respect of aclaim against a successor in default, directors of any successoror directors of the relevant person. However, this exclusiondoes not apply if:


4


(a) (i) the relevant person in default is a mutual associ-ation which is not a large mutual associationand the directors do not receive a salary orother remuneration for services performed bythem for the relevant person in default; or

(ii) in respect of a claim against a successor in de-fault, the relevant person or a successor, towhichever the directorship relates, is a mutualassociation which is not a large mutual associ-ation and the directors do not receive a salaryor other remuneration for services performedby them for the relevant person or a successor,as applicable; or

(b) (i) the relevant person in default is a credit union;or

(ii) in respect of a claim against a successor in de-fault, the relevant person or a successor, towhichever the directorship relates, is a creditunion.

(8) [deleted]

(9) Bodies corporate in the same group as the relevant person indefault or, in respect of a claim against a successor in default,bodies corporate in the same group as a successor or the relev-ant person, as applicable, unless that body corporate is:

(a) a trustee of a stakeholder pension scheme (which isnot an occupational pension scheme) or a personal pen-sion scheme (but in each case if the trustee is a firm itwill only be an eligible claimant if its claim arises outof a regulated activity for which it does not have a per-mission); or

(aa) a trustee of:

(i) an occupational pension scheme in relation tomembers’ benefits which are money-purchasebenefits; or

(ii) (unless (i) applies) an occupational pensionscheme of an employer which is not a large com-pany, large partnership or large mutual associ-ation; or

(b) carrying on the regulated activity of operating or wind-ing up a stakeholder pension scheme (which is not anoccupational pension scheme) or personal pensionscheme.

(10) [deleted]

(11) [deleted]


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R4.2.3


(12) Persons who, in the opinion of theFSCS, are responsible for, orhave contributed to, the relevant person's (or, where applic-able, a successor’s) default

(13) Large companies

(14) Large partnerships

(15) Persons whose claim arises from transactions in connectionwith which they have been convicted of an offence of moneylaundering.

(16) [deleted]

(17) Where the claim is in relation to protected non-investment in-surance mediation, bodies corporate, partnerships, mutual as-sociations and unincorporated associations which are notsmall businesses.

(18) Alternative investment funds, and anyone who is the AIFM ordepositary of an alternative investment fund.

(19) Large mutual associations

(20) Where the claim is in relation to protected debt managementbusiness, any person other than a natural person.

[deleted]

COMP 4 : Eligible claimants Section 4.3 : Exceptions: Circumstanceswhere a person coming within COMP 4.2.2R

may receive compensation

4

R4.3.1

R4.3.2

R4.3.3

R4.3.4

R4.3.5

R4.3.6


4.3 Exceptions: Circumstances where aperson coming within COMP 4.2.2Rmay receive compensation

[deleted]

Long term insurance......................................................................................................A person other than one which comes within any of categories (7), (9), (12)or (15) of COMP 4.2.2R is eligible to claim compensation in respect of a longterm insurance contract.

Relevant general insurance contracts......................................................................................................(1) A person falling within categories (1)-(4) of ■ COMP 4.2.2 R is eligible

to claim compensation in respect of a relevant general insurancecontract if, at the date the contract commenced he was a smallbusiness.

(2) Where the contract has been renewed, the last renewal date shall betaken as the commencement date.

A partnership which falls within category 14, or category 17, or both ofCOMP 4.2.2R is eligible to claim compensation in respect of a relevantgeneral insurance contract entered into before commencement.

[deleted]

Liability subject to compulsory insurance......................................................................................................A person who comes within COMP 4.2.2R is eligible to claim compensation inrespect of a liability subject to compulsory insurance if the claim is inconnection with protected non-investment insurance mediation.

COMP 4 : Eligible claimants Section 4.3 : Exceptions: Circumstanceswhere a person coming within COMP 4.2.2R

may receive compensation

4

G4.3.7

R4.3.8

R4.3.9


Protected home finance mediation......................................................................................................There are no exceptions to COMP 4.2.2R for claims made in connection withprotected home finance mediation.

Eligibility to claim in specified circumstances......................................................................................................The FSCS may treat a person who comes within category (7) or (12) of■ COMP 4.2.2 R as eligible to claim compensation where:

(1) this is desirable to achieve the efficient performance of any of itsfunctions, including without limitation; to achieve the efficientpayment of compensation; and

(2) treating these persons as eligible to claim compensation would, in theopinion of the FSCS, be beneficial to the generality of eligibleclaimants who will be affected by the action in (1).

Protected investment business......................................................................................................A person is eligible to claim compensation for claims made in connectionwith protected investment business if, at the date at which the relevantperson (or, where applicable, a successor) is deemed to be in default, he:

(1) came within category (14) of ■ COMP 4.2.2 R and he does not exceedthe limits for a body corporate which qualifies as a small companyunder section 247 of the Companies Act 1985 or section 382 of theCompanies Act 2006 as applicable; or

(2) came within category (19) of ■ COMP 4.2.2 R.



COMP 4 : Eligible claimants Section 4.4 : Exceptions: Relevant generalinsurance contracts: mesothelioma claims

4

R4.4.1

R4.4.2

R4.4.3

R4.4.4

R4.4.5


4.4 Exceptions: Relevant generalinsurance contracts: mesotheliomaclaims

Application......................................................................................................[deleted]

Claims for contribution by responsible persons......................................................................................................[deleted]

[deleted]

[deleted]

Limits to amounts payable for contribution claims......................................................................................................[deleted]

Compensation

Chapter 5

Protected claims


COMP 5 : Protected claims Section 5.1 : Application and Purpose

5R5.1.1

G5.1.2

G5.1.3





Purpose......................................................................................................The purpose of this chapter is to set out the various categories of claim forwhich compensation may be payable.

COMP 5 : Protected claims Section 5.2 : What is a protected claim?

5R5.2.1

G5.2.2

R5.2.3

G5.2.4


5.2 What is a protected claim?

A protected claim is:

(1) [deleted]

(2) [deleted]

(3) a claim in connection with protected investment business (see■ COMP 5.5); or

(4) a claim in connection with protected home finance mediation (see■ COMP 5.6); or

(5) a claim in connection with protected non-investment insurancemediation (see ■ COMP 5.7); or

(6) a claim in connection with protected debt management business (see■ COMP 5.8).

() [deleted]

Claims in respect of Law Society members......................................................................................................Notwithstanding ■ COMP 5.2.1 R and paragraph (1)(d) of the definition ofparticipant firm, where the relevant person is in default:

(1) is an authorised professional firm that is subject to the rules of theLaw Society (England and Wales) or the Law Society of Scotland; and

(2) with respect to its regulated activities, does not participate in therelevant society's compensation scheme:

a claim with respect to that person is only a protected claim if, when thebasis for the claim arose, that person did not participate in the relevantsociety's compensation scheme with respect to its regulated activities.

Claims in respect of successors......................................................................................................Where a claim for compensation is in respect of a claim against a successor,the following rules apply to the relevant person for whose liabilities thesuccessor has assumed responsibility (or to such relevant person’s activities, asthe case may be):

(1) ■ COMP 5.5.1R;

COMP 5 : Protected claims Section 5.2 : What is a protected claim?

5


(2) ■ COMP 5.5.2R;

(3) ■ COMP 5.5.3R;

(4) ■ COMP 5.6.1R;

(5) ■ COMP 5.6.2R; and

(6) ■ COMP 5.7.2R.

COMP 5 : Protected claims Section 5.5 : Protected investment business

5R5.5.1

R5.5.2


5.5 Protected investment business

Protected investment business is:

(1) designated investment business carried on by the relevant personwith, or for the benefit of, the claimant (so long as that claimant hasa claim), or as agent on the claimant's behalf;

(2) the activities of the manager or trustee of an AUT, provided that theclaim is made by a holder;

(3) the activities of the ACD or depositary of an ICVC, provided that theclaim is made by a holder;

(4) the activities of the authorised contractual scheme manager ordepositary of an ACS, provided that the claim is made by a holder;

(5) the activities of the manager or depositary of an ELTIF, provided thatthe claim is made by a holder;

(5A) the activities by a recognised investment exchange of operating amultilateral trading facility or operating an organised trading facility,

(6) the intermediation of structured deposits,

provided that the territorial scope condition in ■ COMP 5.5.2 R is satisfied and,for a firm acting as the manager or depositary of a fund, one of theconditions in ■ COMP 5.5.3 R is satisfied.

Territorial scope condition......................................................................................................The territorial scope condition is that the protected investment business wascarried on from:

(1) an establishment of the relevant person in the United Kingdom; or

(2) a branch of a UK firm which is:

(a) a MiFID investment firm established in another EEA State; or

(b) a UCITS management company established in another EEA State(but only in relation to managing investments (other thanadvising on investments or safeguarding and administeringinvestments);

() and the claim is an ICD claim; or

COMP 5 : Protected claims Section 5.5 : Protected investment business

5

R5.5.3

R5.5.4


(3) both (1) and (2); or

(4) (a) a UK branch of an EEA UCITS management company; or

(b) an establishment of such an EEA UCITS management company inits Home State from which cross border services are being carriedon;

and in either case the management company is providing collectiveportfolio management services for a UCITS scheme but only if theclaim relates to that activity; or

(5) an establishment of an incoming EEA AIFM in another EEA State ifthe claim relates to providing AIFM management functions on a crossborder services basis for an authorised AIF.

Managers and depositaries of funds......................................................................................................The conditions referred to in ■ COMP 5.5.1 R for a manager or depositary of afund are:

(1) for the activities of managing an AIF, managing a UCITS orestablishing, operating or winding up a collective investment scheme,the claim is in respect of an investment in:

(a) an authorised fund; or

(b) any other fund which has its registered office or head office inthe UK or is otherwise domiciled in the UK unless it is an AIF thatis a body corporate and not a collective investment scheme;

(2) where a firm is acting as depositary of a fund, the claim is in respectof their activities for:

(a) an authorised fund; or

(b) a charity AIF unless it is a body corporate that is not a collectiveinvestment scheme.

Advising without a personal recommendation......................................................................................................The FSCS must treat a claim relating to advice in relation to a designatedinvestment that falls outside article 53(1) of the Regulated Activities Orderby virtue of article 53(1A) of that Order as being ‘in connection withprotected investment business’ for the purposes of ■ COMP 5.2.1R(3) wherethe relevant person giving the advice, at the time the act or omission givingrise to the claim took place:

(1) had, or required, permission to carry on; or

(2) (in the case of an appointed representative) was exempt from thegeneral prohibition in respect of,

an activity that was designated investment business.

COMP 5 : Protected claims Section 5.6 : Protected home financemediation

5R5.6.1

R5.6.2

R5.6.3


5.6 Protected home finance mediation

Protected home finance mediation is:

(1) advising on a home finance transaction; or

(2) arranging (bringing about) a home finance transaction; or

(3) making arrangements with a view to a home finance transaction; or

(4) agreeing to carry on a regulated activity in (1) to (3); or

(5) the activities of a home finance provider which would be arrangingbut for article 28A of the Regulated Activities Order (Arrangingcontracts or plans to which the arranger is a party);

provided that the condition in ■ COMP 5.6.2 R is satisfied.

■ COMP 5.6.1 R applies only if the protected home finance mediation wascarried on by a relevant person:

(1) with a customer who was a resident in the United Kingdom; or

(2) from an establishment maintained by the relevant person (or itsappointed representative) in the United Kingdom with a customerwho was resident elsewhere in the EEA;

at the time the protected home finance mediation was carried on.

This section does not apply in respect of a regulated mortgage contractwhich is:

(1) a legacy CCA mortgage contract; or

(2) a CBTL credit agreement.

COMP 5 : Protected claims Section 5.7 : Protected non-investmentinsurance mediation

5R5.7.1

R5.7.2

G5.7.3

G5.7.4


5.7 Protected non-investment insurancemediation

Protected non-investment insurance mediation is an insurance mediationactivity where the investment concerned is a relevant general insurancecontract or a pure protection contract but which is not a long-term careinsurance contract or a reinsurance contract, provided that the conditions in■ COMP 5.7.2 R are satisfied.

■ COMP 5.7.1 R only applies if the conditions in (1) and (2) are satisfied:

(1) the protected non-investment insurance mediation was carried onfrom:

(a) an establishment of the relevant person in the United Kingdom;or

(b) a branch of a UK firm established in another EEA State in theexercise of an EEA right derived from the IMD; and

(2) the claimant making the claim (or where ■ COMP 3.2.4 R applies, thecustomer on behalf of whom a firm makes a claim) dealt initially,with a view to entering into a relevant general insurance contract ora pure protection contract but not a long-term care insurancecontract or a reinsurance contract, with an intermediary that was:

(a) established in the United Kingdom; or

(b) a branch of a UK firm established in another EEA State in theexercise of an EEA right derived from the IMD.

The FSCS will not cover a claim against an intermediary or a successor of anintermediary that meets the criteria of either ■ COMP 5.7.2 R (2)(a) or■ COMP 5.7.2 R (2)(b) where the claimant was introduced to that intermediaryby an intermediary that does not meet the criteria of either■ COMP 5.7.2 R (2)(a) or ■ COMP 5.7.2 R (2)(b).

The FSCS will not cover a claim in respect of an intermediary that is not arelevant person, for example a retailer selling extended warranties that areconnected contracts. However, ■ COMP 5.7.2 R has the effect that a claim inrespect of a relevant person further up the chain carrying on protected non-investment insurance mediation in accordance with ■ COMP 5.7.2 R (1)(a) maybe covered by the FSCS if the claimant dealt initially with a UK intermediarythat is not a relevant person.

COMP 5 : Protected claims Section 5.7 : Protected non-investmentinsurance mediation

5

R5.7.5


Advising without a personal recommendation......................................................................................................The FSCS must treat a claim relating to advice on a relevant generalinsurance contract or a pure protection contract (which is not a long-terminsurance contract or a reinsurance contract) that falls outside article 53(1) ofthe Regulated Activities Order by virtue of article 53(1A) of that Order asbeing ‘in connection with protected non-investment insurance business’ forthe purposes of ■ COMP 5.2.1R(5) where the relevant person giving the advice,at the time the act or omission giving rise to the claim took place:

(1) had, or required, permission to carry on; or

(2) (in the case of an appointed representative) was exempt from thegeneral prohibition in respect of,

an activity that was non-investment insurance business.

COMP 5 : Protected claims Section 5.8 : Protected debt managementbusiness

5R5.8.1


5.8 Protected debt managementbusiness

Protected debt management business is debt management activity carriedout by a CASS debt management firm from an establishment maintained byit in the United Kingdom, but only in so far as the claim relates to a shortfallin client money.

Compensation

Chapter 6

Relevant persons andsuccessors in default


COMP 6 : Relevant persons and Section 6.1 : Application and Purposesuccessors in default

6R6.1.1

G6.1.2

G6.1.3

G6.1.4





Purpose......................................................................................................The purpose of this chapter is to specify the types of person against whom aclaimant must have a claim in order to be eligible for compensation, andwhen those persons are 'in default'. Generally, this occurs when they areinsolvent or unable to meet their liabilities to claimants.

To be eligible for compensation a claimant's claim must be against a relevantperson (or, where applicable, a successor) in default: see ■ COMP 3.2.1 R (2).

COMP 6 : Relevant persons and Section 6.2 : Who is a relevant person?successors in default

6

R6.2.1

G6.2.2


6.2 Who is a relevant person?

A relevant person is a person who was, at the time the act or omission givingrise to the claim against it took place:

(1) a participant firm; or

(2) an appointed representative of a participant firm.

[deleted]

COMP 6 : Relevant persons and Section 6.3 : When is a relevant person insuccessors in default default?

6R6.3.1

G6.3.1A

R6.3.2

R6.3.3


6.3 When is a relevant person indefault?

A relevant person is in default if:

(1) (except in relation to an ICD claim) the FSCS has determined it to bein default under ■ COMP 6.3.2 R, ■ COMP 6.3.3 R or ■ COMP 6.3.4 R; or

(2) (in relation to an ICD claim):

(a) the FCA has determined it to be in default under ■ COMP 6.3.2 R;or

(b) a judicial authority has made a ruling that had the effect ofsuspending the ability of eligible claimants to bring claims againstthe participant firm, if that is earlier than (a); and

if a relevant person is in default in relation to an ICD claim it shall bedeemed to be in default in relation to any other type of protectedclaim.

[Note: article 2(2) of the Investor Compensation Directive]

The FSCS (or, where ■ COMP 6.3.1 R(2)(a) applies, the FCA) may determine arelevant person to be in default when it is, in the opinion of the FSCS (or theFCA):

(1) unable to satisfy protected claims against it; or

(2) likely to be unable to satisfy protected claims against it.

The FSCS may determine a relevant person to be in default if it is satisfiedthat a protected claim exists (other than an ICD claim), and the relevantperson is the subject of one or more of the following proceedings in theUnited Kingdom (or of equivalent or similar proceedings in anotherjurisdiction):

(1) the passing of a resolution for a creditors' voluntary winding up;

(2) a determination by the relevant person'sHome State regulator thatthe relevant person appears unable to meet claims against it and hasno early prospect of being able to do so;

COMP 6 : Relevant persons and Section 6.3 : When is a relevant person insuccessors in default default?

6

R6.3.4

R6.3.5

R6.3.6

R6.3.7

R6.3.8

R6.3.9


(3) the appointment of a liquidator or administrator, or provisionalliquidator or interim manager;

(4) the making of an order by a court of competent jurisdiction for thewinding up of a company, the dissolution of a partnership, theadministration of a company or partnership, or the bankruptcy of anindividual;

(5) the approval of a company voluntary arrangement, a partnershipvoluntary arrangement, or of an individual voluntary arrangement.

The FSCS may determine a relevant person to be in default if it is satisfiedthat a protected claim exists (other than an ICD claim), and:

(1) the FSCS is satisfied that the relevant person cannot be contacted atits last place of business and that reasonable steps have been takento establish a forwarding or current address, but without success; and

(2) there appears to the FSCS to be no evidence that the relevant personwill be able to meet claims made against it.

[deleted]

[deleted]

[deleted]

Claims arising under COMP 3.2.4 R......................................................................................................For the purposes of ■ COMP 6.3 a claim made by a firm under ■ COMP 3.2.4 R isto be treated as if it were a protected claim against the relevant person.

Scheme manager's power to require information......................................................................................................For the purposes of sections 219(1A)(b) and (d) of the Act (Scheme manager'spower to require information) whether a relevant person is unable or likelyto be unable to satisfy claims shall be determined by reference to whether itis in default.

http://www.legislation.gov.uk/ukpga/2000/8/section/219/2009-12-06#section-219-1A-b

http://www.legislation.gov.uk/ukpga/2000/8/section/219/2009-12-06#section-219-1A-d

COMP 6 : Relevant persons and Section 6.3A : When is a successor insuccessors in default default?

6

R6.3A.1

R6.3A.2

R6.3A.3


6.3A When is a successor in default?

A successor is in default if:

the FSCS has determined it to be in default under■ COMP 6.3A.2R, ■ COMP 6.3A.3R, or ■ COMP 6.3A.4R, unless theclaim is within (b); or

(in relation to an ICD claim against a successor that is a MiFIDinvestment firm):

the FCA has determined it to be in default under■ COMP 6.3A.2R; or

a judicial authority has made a ruling that had the effect ofsuspending the ability of eligible claimants to bring claimsagainst the successor, if that is earlier than (i).

If a successor is in default in relation to an ICD claim within (1)(b) it isto be deemed to be in default in relation to any other type ofprotected claim.

The FSCS (or, where ■ COMP 6.3A.1R(1)(b)(i) applies, the FCA) may determine asuccessor to be in default when it is, in the opinion of the FSCS (or the FCA):

(1) unable to satisfy protected claims against it; or

(2) likely to be unable to satisfy protected claims against it.

The FSCS may determine a successor to be in default if it is satisfied that aprotected claim exists (other than an ICD claim against a successor that is aMiFID investment firm), and the successor is the subject of one or more ofthe following proceedings in the United Kingdom (or of equivalent or similarproceedings in another jurisdiction):

(1) the passing of a resolution for a creditors' voluntary winding up; or

(2) a determination by the successor’s Home State regulator that thesuccessor appears unable to meet claims against it and has no earlyprospect of being able to do so; or

(3) the appointment of a liquidator or administrator, or provisionalliquidator or interim manager; or

(4) the making of an order by a court of competent jurisdiction for thewinding up of a company, the dissolution of a partnership, the


6

R6.3A.4

R6.3A.5


administration of a company or partnership, or the bankruptcy of anindividual; or

(5) the approval of a company voluntary arrangement, a partnershipvoluntary arrangement, or an individual voluntary arrangement.

The FSCS may determine that a successor to be in default if it is satisfied thata protected claim exists (other than an ICD claim against a successor that isan MiFID investment firm), and:

(1) the FSCS is satisfied that the successor cannot be contacted at its lastplace of business and that reasonable steps have been taken toestablish a forwarding or current address, but without success; and

(2) there appears to the FSCS to be no evidence that the successor will beable to meet claims made against it.

For the purposes of sections 219(1A)(b) and (d) of the Act (Scheme manager'spower to require information) whether a successor is unable or likely to beunable to satisfy claims is to be determined by reference to whether it is indefault.

http://www.legislation.gov.uk/ukpga/2000/8/section/219/2016-04-29#section-219-1A-b

http://www.legislation.gov.uk/ukpga/2000/8/section/219/2016-04-29#section-219-1A-d


6


Compensation

Chapter 7

Assignment or subrogation ofrights


COMP 7 : Assignment or Section 7.1 : Applicationsubrogation of rights

7

R7.1.1

G7.1.2

G7.1.3


7.1 Application

Application and Purpose......................................................................................................This chapter applies to the FSCS.


Purpose......................................................................................................The FSCS may (and in some cases must) make an offer of compensationconditional on the assignment of rights to it by a claimant. The FSCS mayalso be subrogated automatically to the claimant's rights.The purpose of thischapter is to make provision for and set out the consequences of anassignment or subrogation of the claimant's rights.

COMP 7 : Assignment or Section 7.2 : How does the assignment ofsubrogation of rights rights work?

7

R7.2.1

R7.2.2

R7.2.3

R7.2.3A

R7.2.3AA


7.2 How does the assignment of rightswork?

The FSCS may make any payment of compensation to a claimant in respectof any protected claim conditional on the claimant assigning the whole orany part of his rights against any one or more of the the relevant person,any third party, or, where applicable, a successor, to the FSCS on such termsas the FSCS thinks fit.

If a claimant assigns the whole or any part of his rights against any person tothe FSCS as a condition of payment, the effect of this is that any sum payablein relation to the rights so assigned will be payable to the FSCS and not theclaimant.

(1) Before taking assignment of rights from the claimant under■ COMP 7.2.1 R, the FSCS must inform the claimant that if, after takingassignment of rights, the FSCS decides not to pursue recoveries usingthose rights it will, if the claimant so requests in writing, reassign theassigned rights to the claimant. The FSCS must comply with such arequest in such circumstances (see ■ COMP 7.4.2 R).

(2) [deleted] [Editor's Note: The text of this sub-paragraph has beenmoved to new ■ COMP 7.4.1 R.]

(3) [deleted]

[deleted]

Electronic assignment......................................................................................................Where the FSCS has paid compensation in respect of a claim, this has theeffect that:

(1) an assignment completed and signed electronically in a formprescribed by the FSCS will be deemed to satisfy the formalities for avalid legal assignment;

(2) production of a hard copy of the electronically signed assignmentform is conclusive evidence (or, in Scotland, sufficient evidence) thatthe formalities of a legal assignment have been complied with andthat a legal assignment has occurred; and

COMP 7 : Assignment or Section 7.2 : How does the assignment ofsubrogation of rights rights work?

7

R7.2.3B

G7.2.3C

G7.2.3D

R7.2.3E

R7.2.4

R7.2.4A

R7.2.5

G7.2.6

R7.2.7


(3) an assignment completed electronically in the prescribed form is to betreated as having been made by writing under the hand of theassignor for the purposes of section 136 of the Law of Property Act1925 and any other formal requirement.

[deleted]

[deleted]

[deleted]

[deleted] [Editor's Note: The amended text of this provision has been movedto new ■ COMP 7.6.1 R.]


[deleted] [Editor's Note: The text of this provision has been moved to new■ COMP 7.6.3 R.]


[deleted] [Editor's Note: The text of this provision has been moved to new■ COMP 7.6.5 G.]

Claims arising under COMP 3.2.4R......................................................................................................(1) For the purposes of compensation paid under ■ COMP 3.2.4 R, FSCS

may require any firm (including, but not limited to, the claimant firm)to assign to FSCS any rights the firm may have to claim against therelevant person in relation to the amount of the shortfall in clientmoney arising out of the failure of the relevant person.

(2) A firm required by FSCS to assign its rights in (1), must assign thoserights as requested, unless it has a reasonable excuse for not doingso.

http://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/136/2016-04-29

COMP 7 : Assignment or Section 7.3 : Automatic subrogationsubrogation of rights

7

R7.3.1

R7.3.2

R7.3.3

R7.3.4


7.3 Automatic subrogation

[deleted]

The FSCS's powers in this section may be used:

(1) separately or in any combination as an alternative and in substitutionfor the powers and processes elsewhere in this sourcebook; and/or

(2) [deleted]

(3) in relation to all or any part of a protected claim or class of protectedclaim made with respect to the relevant person (or, where applicable,a successor).

(4) [deleted]

The FSCS may determine that the exercise of any power in this section issubject to such incidental, consequential or supplemental conditions as theFSCS considers appropriate.

Determinations by the FSCS......................................................................................................(1) Any power conferred on the FSCS to make determinations under this

section is exercisable in writing.

(2) An instrument by which the FSCS makes the determination mustspecify the provision under which it is made, the date and time fromwhich it takes effect and the relevant person (or, where applicable, asuccessor) and protected claims, parts of protected claims and/orclasses of protected claims in respect of which it applies.

(3) The FSCS must take appropriate steps to publish the determination assoon as possible after it is made. Such publication must beaccompanied by a statement explaining the effect of ■ COMP 7.4.2 R.

(4) Failure to comply with any requirement in this rule does not affectthe validity of the determination.

(5) A determination by the FSCS under this section may be amended,remade or revoked at any time and subject to the same conditions.


7

R7.3.5

R7.3.6

R7.3.7

R7.3.8


Verification of determinations......................................................................................................(1) The production of a copy of a determination purporting to be made

by the FSCS under this section:

(a) on which is endorsed a certificate, signed by a member of theFSCS's staff authorised by it for that purpose; and

(b) which contains the required statements;

is evidence (or in Scotland sufficient evidence) of the facts stated inthe certificate.

(2) The required statements are:

(a) that the determination was made by the FSCS; and

(b) that the copy is a true copy of the determination.

(3) A certificate purporting to be signed as mentioned in (1) is to betaken to have been properly signed unless the contrary is shown.

(4) A person who wishes in any legal proceedings to rely on adetermination may require the FSCS to endorse a copy of thedetermination with a certificate of the kind mentioned in (1).

Effect of this section on other provisions in this sourcebook etc......................................................................................................Other provisions in this sourcebook and ■ FEES 6 are modified to the extentnecessary to give full effect to the powers provided for in this section.

Other than as expressly provided for, nothing in this section is to be taken aslimiting or modifying the rights or obligations of or powers conferred on theFSCS elsewhere in this sourcebook or in ■ FEES 6.

Rights and obligations against the relevant persons,successors and third parties......................................................................................................The FSCS may determine that:

(1) the payment of compensation by the FSCS;


7

R7.3.9

R7.3.10


(2) [deleted]

shall have all or any of the following effects:

(3) the FSCS shall immediately and automatically be subrogated, subjectto such conditions as the FSCS determines are appropriate, to all orany part (as determined by the FSCS) of the rights and claims in theUnited Kingdom and elsewhere of the claimant against the relevantperson (or, where applicable, a successor) and/or any third party(whether such rights are legal, equitable or of any other naturewhatsoever and in whatever capacity the relevant person (or, whereapplicable, a successor) or third party is acting) in respect of or arisingout of the claim in respect of which the payment of or on account ofcompensation was made;

(4) the FSCS may claim and take legal or any other proceedings or stepsin the United Kingdom or elsewhere to enforce such rights in its ownname or in the name of, and on behalf of, the claimant, or in bothnames against the relevant person (or, where applicable, a successor)and/or any third party;

(5) the subrogated rights and claims conferred on the FSCS shall be rightsof recovery and claims against the relevant person (or, whereapplicable, a successor) and/or any third party which are equivalent(including as to amount and priority and whether or not the relevantperson (or, where applicable, a successor) is insolvent) to and do notexceed the rights and claims that the claimant would have had; and/or

(6) such rights and/or obligations (as determined by the FSCS) as betweenthe relevant person (or, where applicable, a successor) and theclaimant arising out of the protected claim in respect of which thepayment was made shall be transferred to, and subsist between,another authorised person (or, where a successor is not an authorisedperson, an authorised person) with an appropriate permission and theclaimant provided that the authorised person has consented (but thetransferred rights and/or obligations shall be treated as existingbetween the relevant person (or where applicable, a successor) andthe FSCS to the extent of any subrogation, transfer or assignment forthe purposes of (3) to (5) and ■ COMP 7.3.9 R).

The FSCS may alternatively or additionally make the actions in■ COMP 7.3.8R (1) conditional on the claimant assigning or transferring thewhole or any part of all such rights as he may have against the relevantperson (or, where applicable, a successor) and/or any third party on suchterms as the FSCS determines are appropriate.

(1) The FSCS may determine that:

(a) if the claimant does not assign or transfer his rights under■ COMP 7.3.9 R;

(b) if it is impractical to obtain such an assignment or transfer; and/or

(c) if it is otherwise necessary or desirable in conjunction with theexercise of the FSCS's powers under ■ COMP 7.3.8 R or■ COMP 7.3.9 R;


7


that claimant shall be treated as having irrevocably andunconditionally appointed the chairman of the FSCS for the timebeing to be his attorney and agent and on his behalf and in hisname or otherwise to do such things and execute such deeds anddocuments as may be required under such laws of the UnitedKingdom, another EEA State or any other state or law-country tocreate or give effect to such assignment or transfer or otherwise givefull effect to those powers.

(2) The execution of any deed or document under (1) shall be as effectiveas if made in writing by the claimant or by his agent lawfullyauthorised in writing or by will.

COMP 7 : Assignment or Section 7.4 : Duty on FSCS to pursuesubrogation of rights recoveries

7

R7.4.1

R7.4.2


7.4 Duty on FSCS to pursue recoveries

If the FSCS takes assignment or transfer of rights from the claimant or isotherwise subrogated to the rights of the claimant, it must pursue all andonly such recoveries as it considers are likely to be both reasonably possibleand cost effective to pursue.

If the FSCS decides not to pursue such recoveries and a claimant wishes topursue those recoveries himself and so requests in writing, the FSCS mustcomply with that request and assign the rights back to the claimant.

COMP 7 : Assignment or Section 7.6 : Treatment of recoveriessubrogation of rights

7

R7.6.1

R7.6.2

R7.6.3

R7.6.4

G7.6.5


7.6 Treatment of recoveries

If the FSCS makes recoveries in relation to a claim, it may deduct from anyrecoveries paid over to the claimant under ■ COMP 7.6.2 R part or all of itsreasonable costs of recovery and distribution (if any).

Unless compensation was paid under ■ COMP 9.2.3 R, if a claimant assigns ortransfers his rights to the FSCS or a claimant's rights and claims are otherwisesubrogated to the FSCS and the FSCS subsequently makes recoveries throughthose rights or claims, those recoveries must be paid to the claimant:

(1) to the extent that the amount recovered exceeds the amount ofcompensation (excluding interest paid under ■ COMP 11.2.7 R) receivedby the claimant in relation to the protected claim; or

(2) in circumstances where the amount recovered does not exceed theamount of compensation paid, to the extent that failure to pay anysums recovered to the claimant would leave a claimant who hadpromptly accepted an offer of compensation or whose rights andclaims had been subrogated to the FSCS at a disadvantage relative toa claimant who had delayed accepting an offer of compensation orwhose claims had not been subrogated (see ■ COMP 7.6.4 R).

For the purpose of ■ COMP 7.6.2 R compensation received by eligible claimantsin relation to contracts of insurance written at Lloyd’s may include paymentsmade from the Central Fund.

The FSCS must endeavour to ensure that a claimant will not sufferdisadvantage arising solely from his prompt acceptance of the FSCS's offer ofcompensation or from the subrogation of his rights and claims to the FSCScompared with what might have been the position had he delayed hisacceptance or had his claims not been subrogated.

As an example of the circumstances which ■ COMP 7.6.4 R is designed toaddress, take two claimants, A and B.

(1) Both A and B have a protected investment business claim of £60,000against a relevant person (or, where applicable, a successor) indefault. The FSCS offers both claimants £50,000 compensation (themaximum amount payable for such claims under ■ COMP 10.2.3 R). Aaccepts immediately, and assigns his rights against the relevant person(or, where applicable, a successor) to the FSCS, but B delays acceptingthe FSCS's offer of compensation.


7


(2) In this example, the liquidator is able to recover assets from therelevant person (or, where applicable, a successor) in default andmakes a payment of 50p in the pound to all the relevant person's orsuccessor’s, as appropriate, creditors. If the liquidator made thepayment before any offer of compensation from the FSCS had beenaccepted, A and B would both receive £30,000 each from theliquidator, leaving both with a loss of £30,000 to be met by the FSCS.Both claims would be met in full.

(3) However, if the payment were made by the liquidator after A hadaccepted the FSCS's offer of compensation and assigned his rights tothe FSCS, but before B accepted the FSCS offer of compensation, Awould be disadvantaged relative to B even though he has received£50,000 compensation from the FSCS. A would be disadvantagedrelative to B because he promptly accepted the FSCS's offer andassigned his rights to the FSCS. Because A has assigned his rights tothe FSCS, any payment from the liquidator will be made to the FSCSrather than A. In this case the FSCS has paid A more than £30,000, sothe £30,000 from the liquidator that would have been payable to Awill be payable in full to the FSCS and not to A.

(4) B is able to exercise his rights against the liquidator because hedelayed accepting the FSCS's offer and receives £30,000 from theliquidator. B can then make a claim for the remaining £30,000 to theFSCS which the FSCS can pay in full (see ■ COMP 10.2.2 G). B thereforesuffers no loss whereas A is left with a loss of £10,000, being thedifference between his claim of £60,000 and the compensation paidby the FSCS of £50,000.


7


Compensation

Chapter 8

Rejection of application andwithdrawal of offer


COMP 8 : Rejection of Section 8.1 : Application and Purposeapplication and withdrawal ofoffer

8

R8.1.1

G8.1.2

G8.1.3





Purpose......................................................................................................In some circumstances, it may be appropriate for the FSCS to reject anapplication for compensation, or withdraw an offer of compensation. Thepurpose of this chapter is to set out when those circumstances arise.

COMP 8 : Rejection of Section 8.2 : Rejection of application forapplication and withdrawal of compensationoffer

8

R8.2.1

G8.2.2

R8.2.3

R8.2.4

R8.2.4A

R8.2.5


8.2 Rejection of application forcompensation

If an application for compensation contains any material inaccuracy oromission, the FSCS may reject the application unless this is considered by theFSCS to be wholly unintentional.

A rejection under ■ COMP 8.2.1 R does not mean that the claimant cannotreceive compensation. A rejected application may be resubmitted, with theappropriate amendments. An application rejected under ■ COMP 8.2.3 R maybe resubmitted if ■ COMP 8.2.5 R applies.

The FSCS must reject an application for compensation if:

(1) the FSCS considers that a civil claim in respect of the liability wouldhave been defeated by a defence of limitation at the earlier of:

(a) the date on which the relevant person (or, where applicable, asuccessor) is determined to be in default; and

(b) the date on which the claimant first indicates in writing that hemay have a claim against the relevant person (or, whereapplicable, a successor);

unless ■ COMP 8.2.4 R or ■ COMP 8.2.4A R applies; or

(2) the liability of the relevant person (or, where applicable, a successor)to the claimant has been extinguished by the operation of law, unless■ COMP 8.2.5 R applies.

For claims made in connection with protected investment business, protectedhome finance mediation or protected non-investment insurance mediation,the FSCS may disregard a defence of limitation where the FSCS considers thatit would be reasonable to do so.

For a claim which falls to be dealt with (or has properly been dealt with)under a consumer redress scheme, the FSCS must disregard a defence oflimitation which became available after the scheme was made or imposed.

For claims made in connection with protected investment business orprotected non-investment insurance mediation, if a relevant person (or,where applicable, a successor), incorporated as a company, has beendissolved with the result that its liability to the claimant has been

COMP 8 : Rejection of Section 8.2 : Rejection of application forapplication and withdrawal of compensationoffer

8

G8.2.6

R8.2.7

G8.2.8


extinguished by operation of law, the FSCS must treat the claim, for thepurposes of paying compensation, as if the relevant person or a successor, asappropriate, had not been dissolved.

■ COMP 8.2.5 R means that the FSCS will be able to pay compensation in caseswhere:

(1) the company was declared in default on or after 1 December 2001;and

(2) at the time the application for compensation is made, the companyhas been dissolved.

The FSCS may reject an application for compensation if:

(1) it relates to an event or transaction which has been reviewed underthe provisions of a 'deemed scheme' as defined in the FinancialServices and Markets Act 2000 (Transitional Provisions) (Reviews ofPensions Business) Order 2001 (SI 2001/2512); and

(2) as a result of the review in (1) no redress was payable, or redress waspaid, in accordance with the regulatory standards for the review ofsuch events or transactions, and the terms of any scheme order,applicable as at the date of the review.

The purpose of ■ COMP 8.2.7 R is to allow the FSCS to reject claims relating topensions review cases where a review was carried out in accordance with therelevant regulatory standards applicable at the time. 'Deemed schemes' arethose review schemes set up before commencement (that is, 30 November2001) but which are treated as schemes for review of past business under theAct, namely the pensions review and FSAVC review.

http://www.legislation.gov.uk/ukpga/2000/8/2004-07-01

http://www.legislation.gov.uk/ukpga/2000/8/2004-07-01

http://www.legislation.gov.uk/uksi/2001/1177

COMP 8 : Rejection of Section 8.3 : Withdrawal of offer ofapplication and withdrawal of compensationoffer

8

R8.3.1

R8.3.2

R8.3.3

R8.3.4

R8.3.5


8.3 Withdrawal of offer ofcompensation

The FSCS may withdraw any offer of compensation made to a claimant if theoffer is not accepted or if it is not disputed within 90 days of the date onwhich the offer is made.

Where the amount of compensation offered is disputed, the FSCS maywithdraw the offer but must consider exercising its powers to make areduced or interim payment under ■ COMP 11.2.4 R or ■ COMP 11.2.5 R beforedoing so.

The FSCS may repeat any offer withdrawn under ■ COMP 8.3.1 R or■ COMP 8.3.2 R.

The FSCS must withdraw any offer of compensation if it appears to the FSCSthat no such offer should have been made.

The FSCS must seek to recover any compensation paid to a claimant if itappears to the FSCS that no such payment should have been made, unlessthe FSCS believes on reasonable grounds that it would be unreasonable todo so, or that the costs of doing so would exceed any amount that could berecovered.

COMP 8 : Rejection of Section 8.3 : Withdrawal of offer ofapplication and withdrawal of compensationoffer

8


Compensation

Chapter 9

Time limits on payment andpostponing payment


COMP 9 : Time limits on Section 9.1 : Application and Purposepayment and postponingpayment

9

R9.1.1

G9.1.2

G9.1.3





Purpose......................................................................................................The purpose of this chapter is to ensure that compensation is paid toclaimants as quickly as possible and that delays in paying compensation toclaimants are kept to a minimum. The FSCS may postpone payment ofcompensation only in strictly limited circumstances.

COMP 9 : Time limits on Section 9.2 : When must compensation bepayment and postponing paid?payment

9

R9.2.1

R9.2.1A

R9.2.1B

R9.2.2


9.2 When must compensation be paid?

[deleted]

[deleted]

The FSCS must pay a claim as soon as reasonably possible after:

(1) it is satisfied that the conditions in ■ COMP 3.2.1 R have been met; and

(2) it has calculated the amount of compensation due to the claimant;

and in any event within:

(3) three months of that date, unless the FCA has granted the FSCS anextension, in which case payment must be made no later than sixmonths from that date.

The FSCS may postpone paying compensation if:

(1) in the case of a claim against a relevant person who is an appointedrepresentative, the FSCS considers that the claimant should make andpursue an application for compensation against the appointedrepresentative's relevant principal; or

(2) in the case of a claim relating to protected investment business whichis not an ICD claim or a claim relating to protected home financemediation, the FSCS considers that the claimant should first exhausthis rights against the relevant person (or, where applicable, asuccessor) or any third party, or make and pursue an application forcompensation to any other person; or

(3) [deleted]

(4) the claim is one which falls within ■ COMP 12.4.5 R or ■ COMP 12.4.7 Rand it is not practicable for payment to be made within the usualtime limits laid out in ■ COMP 9.2.1 R; or

(5) the claimant has been charged with an offence arising out of or inrelation to money laundering, and those proceedings have not yetbeen concluded.

(6) [deleted]

COMP 9 : Time limits on Section 9.2 : When must compensation bepayment and postponing paid?payment

9

R9.2.3


Notwithstanding ■ COMP 9.2.2 R(2), the FSCS may pay compensation to aclaimant in respect of assets held by a relevant person (or, where applicable,a successor) if an insolvency practitioner has been appointed to the relevantperson (or, where applicable, a successor), and:

(1) the FSCS considers it likely that the insolvency practitioner would, indue course, return the assets to the claimant;

(2) the claimant has agreed to be compensated for the assets on thebasis of the valuation provided by the FSCS; and

(3) the claimant has agreed, to the satisfaction of the FSCS, that hisrights to the assets in respect of which compensation is payableshould pass to it.

Compensation

Chapter 10

Limits on the amount ofcompensation payable


COMP 10 : Limits on the amount Section 10.1 : Application and Purposeof compensation payable

10

R10.1.1

G10.1.2

G10.1.3

G10.1.4





Purpose......................................................................................................In most cases it is appropriate for there to be a limit on the amount ofcompensation payable by the FSCS and that there should be some part ofthe claim which is not compensatable and for which the claimant must bearthe loss. The purpose of this chapter is to set these limits out.

[deleted]

COMP 10 : Limits on the amount Section 10.2 : Limits on compensationof compensation payable payable

10

R10.2.1

G10.2.2

R10.2.3


10.2 Limits on compensation payable

The limits on the maximum compensation sums payable by the FSCS forprotected claims are set out in ■ COMP 10.2.3 R.

The limits apply to the aggregate amount of claims in respect of eachcategory of protected claim that an eligible claimant has against the relevantperson (or, where applicable, a successor). Consequently, a claimant who has,for example, a claim against a relevant person (or, where applicable, asuccessor) in connection with protected investment business of £40,000, anda further such claim of £20,000 , will only receive the £50,000 limit.

Table Limits

This table belongs to COMP 10.2.1R

Type of claim Level of cover Maximumpayment

Protected investment 100% of claim £50,000business

Protected home fin- 100% of claim £50,000ance mediation

Protected non-invest- (1) where the claim is in respect Unlimitedment insurance of a liability subject to compulsorymediation insurance: 100% of claim

(2) where the claim is in respect Unlimitedof:

(a) a relevant omission; and

(b) a professional indemnity insur-ance contract, or would be in re-spect of a professional indemnityinsurance contract, if the insur-ance contract had been effected:

100% of claim

(3) where the claim is: Unlimited

(a) in respect of a relevantomission;

(b) in respect of a relevant generalinsurance contract or would be inrespect of a relevant general insur-ance contract if the insurance con-tract had been effected; and


10

G10.2.4

G10.2.5

R10.2.5A

R10.2.6

R10.2.7

R10.2.8

R10.2.9


Type of claim Level of cover Maximumpayment

(c) arises from the death or incapa-city of the policyholder owing toinjury, sickness or infirmity:

100% of claim

(4) where the claim is in respect Unlimitedof:

(a) a relevant omission; and

(b) a pure protection contract, orwould be in respect of a pure pro-tection contract if the insurancecontract had been effected:

100% of claim

(5) In all other cases: 90% of claim Unlimited

Protected debt man- 100% of claim £50,000agement business

COMP 12 sets out the rules the FSCS will follow when calculating the amountof compensation payable.

■ COMP 12.4.4 R includes further limits relating to ICD claims against certainincoming EEA firms. These reflect the Investor Compensation Directive underwhich compensation may be payable by the incoming EEA firm's Home Statecompensation scheme.

Claims in cases where there is a successor......................................................................................................No claimant shall be eligible to make a claim under the compensationscheme in respect of both the relevant person and a successor in relation tothe same loss.

[deleted]

[deleted]

Claims against more than one member in respect of a singleprotected contract of insurance to be treated as a single claim......................................................................................................

Claims arising under COMP 3.2.4 R......................................................................................................If a firm has a claim under ■ COMP 3.2.4 R, the FSCS must treat the share ofthe shortfall of each customer as if it were a protected claim for thepurposes of calculating the limits of compensation payable, within■ COMP 10.2, in relation to that customer.


10

R10.2.10

R10.2.11

R10.2.12

G10.2.13


[deleted]

[deleted]

[deleted]

[deleted]


10


Compensation

Chapter 11

Payment of compensation


COMP 11 : Payment of Section 11.1 : Application and Purposecompensation

11

R11.1.1

G11.1.2

G11.1.3





Purpose......................................................................................................The FSCS will usually pay compensation direct to the claimant, but in certaincircumstances it may be appropriate for the FSCS to pay compensation tosomeone other than the claimant, or to make reduced or interim payments.The purpose of this chapter is to set out when those circumstances arise.

COMP 11 : Payment of Section 11.2 : Paymentcompensation

11

R11.2.1

R11.2.1A

R11.2.1B

R11.2.2

R11.2.2A

G11.2.2B

R11.2.3


11.2 Payment

To whom must payment be made?......................................................................................................[deleted]

If the FSCS determines that compensation is payable (or any recovery orother amount is payable by the FSCS to the claimant), it must pay it to theclaimant, or if the FSCS so decides, as directed by the claimant, unless■ COMP 11.2.2 R or ■ COMP 11.2.2AR apply.

Where a claimant has a protected claim arising out of the circumstancesdescribed in ■ COMP 12.4.5 R, the FSCS must pay any compensation (and anyrecovery or other amount payable by the FSCS to the claimant) to:

(1) the trustee of an occupational pension scheme; or

(2) a personal pension scheme or other product provider; or

(3) both (1) and (2);

and not to the claimant, unless exceptional circumstances apply.

Where a claimant has a claim that falls within ■ COMP 12A.3.1R, the FSCS maypay any compensation to:

(1) the participants and not to the claimant; or

(2) the collective investment scheme and (where different) not to theclaimant; or

(3) any combination of the above.

As a result of ■ COMP 12A.3.1R, the FSCS must try to ensure that the amountpaid is no more than the amount of the loss suffered by the participant.


11

R11.2.3A

R11.2.4

R11.2.5

R11.2.6

G11.2.6A


Form and method of paying compensation......................................................................................................The FSCS may pay compensation in any form and by any method (or anycombination of them) that it determines is appropriate including, withoutlimitation:

(1) by paying the compensation (on such terms as the FSCS considersappropriate) to an authorised person with permission to acceptdeposits which agrees to become liable to the claimant in a like sum;

(2) by paying compensation directly into an existing deposit account of(or for the benefit of) the claimant, or as otherwise identified by (oron behalf of) the claimant, with an authorised person (but beforedoing so the FSCS must take such steps as it considers appropriate toverify the existence of such an account and to give notice to theclaimant of its intention to exercise this power); and/or

(3) [deleted]

(4) by paying compensation to a firm, which makes a claim on behalf ofits clients, if the FSCS is satisfied that:

(a) the business of a relevant person in default has been transferredto the firm;

(b) each client has a claim against the relevant person in defaultarising out of a shortfall in client money or safe custody assetsheld by the relevant person in default;

(c) the clients in respect of which compensation is to be paid satisfythe conditions set out in ■ COMP 3.2.2 R (1); and

(d) the firm has agreed, on such terms as the FSCS thinks fit, to pay,or credit the accounts of, without deduction, each client, thatpart of the compensation due to him.

Reduced or interim payments......................................................................................................If the FSCS is satisfied that in principle compensation is payable in connectionwith any protected claim, but considers that immediate payment in fullwould not be prudent because of uncertainty as to the amount of theclaimant's overall claim, it may decide to pay an appropriate lesser sum infinal settlement, or to make payment on account.

The FSCS may also decide to make a payment on account or to pay a lessersum in final settlement if the claimant has any reasonable prospect forrecovery in respect of the claim from any third party or by applying forcompensation to any other person.

The FSCS may not pay a lesser sum in final settlement under ■ COMP 11.2.4 Rand ■ COMP 11.2.5 R where the claim is an ICD claim.

■ COMP 11.2.4 R applies to compensation payable in connection with anyprotected claim. It would, for example, apply to the situation where the FSCSconsiders it imprudent to make a payment in full because of uncertainty asto the value a court might attribute to a bonus provided for under a long-term insurance contract. In such circumstances the FSCS may make payment


11

R11.2.7

R11.2.8

R11.2.9

G11.2.10


of compensation on account to the policyholder in respect of benefits underthe contract the value of which is not uncertain.

Paying interest on compensation......................................................................................................The FSCS may pay interest on the compensation sum in such circumstances asit considers appropriate.

Interest under ■ COMP 11.2.7 R is not to be taken into account when applyingthe limits on the compensation sum payable in respect of a claim underCOMP 10.

Paying full compensation in return for rights......................................................................................................Where the FSCS considers that the conditions in ■ COMP 11.2.4R are satisfiedbut, in relation to a class of claim, in order to provide fair compensation forthe generality of such claims it would be appropriate to take the approach in(1) and (2) rather than pay an appropriate lesser sum in final settlement ormake a payment on account, it may for that class of claim:

(1) receive whether by assignment, transfer or operation of law thewhole or any part of a claimant's rights against the relevant person(or, where applicable, a successor), or against any third party, or bothon such terms as the FSCS thinks fit; and

(2) disregard the value of the rights so received in determining theclaimant's overall claim.

Factors that the FSCS may take into account when considering taking theapproach in ■ COMP 11.2.9R (1) and ■ COMP 11.2.9R (2) include whether theamount of claimants' overall claims are likely to be assessed within areasonable time frame, the circumstances of the claimants, the circumstancesof the claims and the nature of the products to which the claims relate.


11


Compensation

Chapter 12

Calculating compensation


COMP 12 : Calculating Section 12.1 : Application and Purposecompensation

12

R12.1.1

G12.1.2

G12.1.3




This chapter is also relevant to claimants, since it sets out how a claim will bequantified. (For the process of paying compensation, including the limits onthe amount of compensation that can be paid, see ■ COMP 8 - ■ COMP 11).

Purpose......................................................................................................The purpose of this chapter is to set out the different ways in which the FSCSis to calculate compensation.

COMP 12 : Calculating Section 12.2 : Quantification: generalcompensation

12

R12.2.1A

R12.2.2

G12.2.3

R12.2.4

G12.2.5

G12.2.6


12.2 Quantification: general

The amount of compensation payable to the claimant in respect of any typeof protected claim is the amount of his overall net claim against the relevantperson (or, where applicable, a successor) at the quantification date and anyreference in COMP to overall claim means "overall net claim".

■ COMP 12.2.1AR is, however, subject to the other provisions of COMP, inparticular those rules that set limits on the amount of compensation payablefor various types of protected claim. The limits are set out in COMP 10.

Where a liability of a relevant person (or, where applicable, a successor) toan eligible claimant could fall within more than one type of claim protectedby the compensation scheme whether under the rules of the FCA (see■ COMP 5.2.1 R) or of the PRA, for example a claim in connection with moneyheld by a MiFID investment firm that is also a credit institution, the FSCSshould seek to ensure that the claimant does not receive any furthercompensation payment from the FSCS in cases where the claimant hasalready received compensation from the FSCS in respect of that claim.

Overall net claim......................................................................................................A claimant's overall claim is the sum of the protected claims of the samecategory that he has against a relevant person (or, where applicable, asuccessor) in default, less the amount of any liability which the relevantperson or successor, as appropriate, may set off against any of those claims(see ■ COMP 10.2.2 G).

For the different categories of protected claim, see COMP 5 and■ COMP 10.2.3 R.

In calculating the claimant's overall claim, the FSCS may rely, to the extentthat it is relevant, on any determination by:

(1) a court of competent jurisdiction;

(2) a trustee in bankruptcy;

(3) a liquidator;

(4) any other recognised insolvency practitioner;

COMP 12 : Calculating Section 12.2 : Quantification: generalcompensation

12

R12.2.7A

R12.2.8

R12.2.10


and on the certification of any net sum due which is made in defaultproceedings of any exchange or clearing house.

Payments to the claimant......................................................................................................The FSCS must take into account any payments to the claimant (includingamounts recovered by the FSCS on behalf of the claimant) made by therelevant person (or, where applicable, a successor) or the FSCS or any otherperson, including any payment made by the FSCS under the PRA’s rules, ifthat payment is connected with the relevant person's (or, where applicable, asuccessor's) liability to the claimant in calculating the claimant's overall claim.

Time for calculation of compensation due to the claimant......................................................................................................The FSCS must calculate the amount of compensation due to the claimant assoon as reasonably possible after it is satisfied that the conditions in■ COMP 3.2.1 R have been met.

Settlement of claims......................................................................................................(1) The FSCS may pay compensation without fully or at all investigating

the eligibility of the claimant and/or the validity and/or amount ofthe claim notwithstanding any provision in this sourcebook or ■ FEES 6to the contrary, if in the opinion of the FSCS:

(a) the costs of investigating the merits of the claim are reasonablylikely to be disproportionate to the likely benefit of suchinvestigation; and

(b) (as a result or otherwise) it is reasonably in the interests ofparticipant firms to do so.

(2) This rule does not apply with respect to claims that are excluded byarticle 3 of the Investor Compensation Directive.

COMP 12 : Calculating Section 12.3 : Quantification datecompensation

12

R12.3.5

R12.3.6

R12.3.7

R12.3.8

R12.3.9


12.3 Quantification date

Protected investment business......................................................................................................For a claim made in connection with protected investment business which isnot an ICD claim, the FSCS must determine a specific date as thequantification date, and this date may be either on, before or after the dateof the determination of default.

For a claim made in connection with protected investment business which isan ICD claim, the quantification date is the date the relevant person, or,where applicable, a successor, is determined to be in default.

Protected home finance mediation......................................................................................................For a claim made in connection with protected home finance mediation, theFSCS must determine a specific date as the quantification date, and this datemay be either on, before or after the date of determination of default.

Protected non-investment insurance mediation......................................................................................................For a claim made in connection with protected non-investment insurancemediation, the FSCS must determine a specific date as the quantificationdate, and this date may be either on, before or after the date ofdetermination of default.

Protected debt management business......................................................................................................For a claim made in connection with protected debt management business,the FSCS must determine a specific date as the quantification date, and thisdate may be either on, before or after the date of determination of default.

COMP 12 : Calculating Section 12.4 : The compensation calculationcompensation

12

R12.4.2

R12.4.3

R12.4.4

R12.4.5


12.4 The compensation calculation

Protected investment business: general......................................................................................................The FSCS may pay compensation for any claim made in connection withprotected investment business which is not:

(1) a claim for property held; or

(2) a claim arising from transactions which remain uncompleted at thequantification date;

only to the extent that the FSCS considers that the payment of compensationis essential in order to provide the claimant with fair compensation.

The FSCS must not pay compensation for any claim in connection withprotected investment business to the extent that it relates to or depends on:

(1) a failure of investment performance to match a guarantee given orrepresentation made; or

(2) a contractual obligation to pay or promise to pay which the FSCSconsiders to have been undertaken without full consideration passingto the relevant person or in anticipation of possible insolvency; or

(3) the mere fluctuation in the value of an investment.

If the claimant has an ICD claim against an incoming EEA firm which is aMiFID investment firm or, where applicable, a successor of such a firm, theFSCS must take account of the liability of the Home State compensationscheme in calculating the compensation payable by the FSCS.

Protected investment business: claims covered by the pensionsreview......................................................................................................If the claimant has a claim in connection with protected investment businessrelating to the fact that the claimant has:

(1) while eligible or reasonably likely to become eligible to be a memberof an occupational pension scheme, instead become a member of apersonal pension scheme or entered into a retirement annuity; or


12

R12.4.6

R12.4.7

R12.4.8


(2) ceased to be a member of, or to pay contributions to, anoccupational pension scheme, and has instead become a member of apersonal pension scheme or entered into a retirement annuity; or

(3) transferred to a personal pension scheme accrued rights under anoccupational pension scheme which is not a defined contribution(money purchase) scheme; or

(4) ceased to be a member of an occupational pension scheme and hasinstead (by virtue of such a provision as is mentioned in section591(2)(g) of the Income and Corporation Taxes Act 1988) entered intoarrangements for securing relevant benefits by means of an annuity;

the FSCS must take the steps set out in COMP 12.4.6R.

If COMP 12.4.5R applies, the FSCS must follow the Specification of Standardsand Procedures issued by the FSA in October 1994, as supplemented andmodified by subsequent guidance issued by the FCA (in particular, that ofNovember 1996) (the 'Specification') in:

(1) assessing whether a relevant person has complied with the relevantregulatory requirements;

(2) assessing whether non-compliance has caused the claimant loss; and

(3) calculating the amount of compensation due (where the FSCS mayrely on calculations made by the FCA or any previous regulator of therelevant person);

unless the FSCS considers that departure from the Specification is essential inorder to provide the claimant with fair compensation.

Protected investment business: FSAVC Review......................................................................................................Where a claim made in connection with protected investment businessrelates to an Additional Voluntary Contribution policy advised on orarranged by a relevant person, the FSCS must follow the FSAVC ReviewModel Guidance issued by the FSA in May 2000 (the "Guidance") in:

(1) assessing whether the relevant person has complied with the relevantregulatory requirements;


(3) calculating the compensation due (where the FSCS may rely oncalculations made by the FCA or any previous regulator of therelevant person);

unless the FSCS considers that departure from the Guidance is essential inorder to provide the claimant with fair compensation.

Protected investment business: excessive benefits......................................................................................................The FSCS may decide to reduce the compensation that would otherwise bepayable for a claim made in connection with protected investment businessthat is not an ICD claim, if it is satisfied that:

http://www.legislation.gov.uk/ukpga/1988/1/section/591/enacted#section-591-2-g

http://www.legislation.gov.uk/ukpga/1988/1/section/591/enacted#section-591-2-g


12

R12.4.16

R12.4.17

R12.4.18

R12.4.19

R12.4.20

R12.4.21


(1) there is evidence of contributory negligence by the claimant; or

(2) payment of the full amount would provide a greater benefit than theclaimant might reasonably have expected or than the benefitavailable on similar investments with other relevant persons; and

it would be inequitable for the FSCS not to take account of (1) or (2).

[deleted]

Protected home finance mediation......................................................................................................The FSCS may pay compensation for any claim made in connection withprotected home finance mediation only to the extent that the FSCS considersthat the payment of compensation is essential in order to provide theclaimant with fair compensation.

The FSCS must not pay compensation for any claim in connection withprotected home finance mediation to the extent that it relates or dependson:

(1) a failure of investment performance to match a guarantee given orrepresentation made; or

(2) the mere fluctuation in the value of property

The FSCS may decide to reduce the compensation that would otherwise bepayable for a claim made in connection with protected home financemediation if it is satisfied that there is evidence of contributory negligenceby the claimant and it would be inequitable for FSCS not to take account ofthat fact.

Protected non-investment insurance mediation......................................................................................................The FSCS may pay compensation for any claim made in connection withprotected non-investment insurance mediation only to the extent that theFSCS considers that the payment of compensation is essential in order toprovide the claimant with fair compensation.

The FSCS may decide to reduce the compensation that would otherwise bepayable for a claim made in connection with protected non-investmentinsurance mediation if it is satisfied that:

(1) there is evidence of contributory negligence by the claimant; or


12

R12.4.21A

R12.4.22


(2) payment of the full amount would provide a greater benefit than theclaimant might reasonably have expected or than the benefitavailable on similar contracts with other relevant persons; and

it would be inequitable for FSCS not to take account of (1) or (2).

Protected debt management business......................................................................................................The FSCS may pay compensation for any claim made in connection withprotected debt management business only to the extent that the FSCSconsiders that the payment of compensation is essential to provide theclaimant with fair compensation.

Consumer redress schemes......................................................................................................For a claim which falls to be dealt with (or has properly been dealt with)under a consumer redress scheme, the FSCS must apply the scheme in:

(1) assessing whether a relevant person has complied with the relevantregulatory requirements;


(3) calculating the compensation due (where the FSCS may rely oncalculations made by the FCA or other competent persons acting onthe FCA's behalf or authorised to make them under the scheme);

unless the FSCS considers that departure from the scheme is essentialin order to provide the claimant with fair compensation.

COMP 12 : Calculating Section 12.5 : [deleted]compensation

12

R12.5.1

R12.5.2


12.5 [deleted]

[deleted]

[deleted]

COMP 12 : Calculating Section 12.6 : Quantification: trustees,compensation operators of pension schemes, persons

winding up pension schemes, personal…

12


12.6 Quantification: trustees, operatorsof pension schemes, personswinding up pension schemes,personal representatives, agents,and joint claims

[Note: ■ COMP 12.6.1R now appears at ■ COMP 12A.1.1R]


[Note: ■ COMP 12.6.2AR now appears at ■ COMP 12A.1.3R]










COMP 12 : Calculating Section 12.6 : Quantification: trustees,compensation operators of pension schemes, persons

winding up pension schemes, personal…

12


Special cases

Chapter 12A

Special cases

■ Release 27 ● Apr 2018 www.handbook.fca.org.uk COMP 12A/1

COMP 12A : Special cases Section 12A.1 : Trustees and pensionschemes

12A

R12A.1.1

R12A.1.2

R12A.1.3

R12A.1.4

■ Release 27 ● Apr 2018www.handbook.fca.org.ukCOMP 12A/2

12A.1 Trustees and pension schemes

If a claimant’s claim includes a claim as:

trustee; or

the operator of, or the person carrying on the regulated activity ofwinding up, a stakeholder pension scheme (which is not anoccupational pension scheme) or personal pension scheme,

the FSCS must treat him in respect of that claim as if his claim was the claimof a different person.

[Note: this and other rules in this section derive from provisions previously in■ COMP 12.6]

If a claimant has a claim as a bare trustee or nominee company for one ormore beneficiaries, the FSCS must treat the beneficiary or beneficiaries ashaving the claim, and not the claimant.

If a claimant has a claim:

(1) as the trustee of an occupational pension scheme or the trustee oroperator of, or the person carrying on the regulated activity ofwinding up, a stakeholder pension scheme (which is not anoccupational pension scheme) or personal pension scheme; and

(2) for one or more members of a pension scheme (or, where relevant,the beneficiary of any member) whose benefits are, or include,money-purchase benefits;

the FSCS must treat the member or member scheme (or, where relevant, thebeneficiary of any member) as having the claim, and not the claimant(insofar as members’ benefits are money-purchase benefits).

If any group of persons has a claim as:

(1) trustees; or

(2) operators of, or as persons carrying on the regulated activity ofwinding up, a stakeholder pension scheme (which is not anoccupational pension scheme) or personal pension scheme,

COMP 12A : Special cases Section 12A.1 : Trustees and pensionschemes

12A

R12A.1.5

R12A.1.6

R12A.1.7


(or any combination thereof), the FSCS must treat them as a single andcontinuing person distinct from the persons who may from time to time bethe trustees, operators or persons winding up the relevant pension scheme.

Where the same person has a claim as:

(1) trustee for different trusts or for different stakeholder pensionschemes (which are not occupational pension schemes) or personalpension schemes; or

(2) the operator of, or the person carrying on the regulated activity ofwinding up, different stakeholder pension schemes (which are notoccupational pension schemes) or personal pension schemes,

COMP applies as if the claims relating to each of these trusts or schemeswere claims of different persons.

Where the claimant is a trustee, and some of the beneficiaries of the trustare persons who would not be eligible claimants if they had a claimthemselves, the FSCS must adjust the amount of the overall claim toeliminate the part of the claim which, in the FSCS’s view, is a claim for thosebeneficiaries.

Where any of the provisions of ■ COMP 12A.1.1R to ■ COMP 12A.1.6R apply, theFSCS must try to ensure that any amount paid to:

(1) the trustee; or

(2) the operator of, or the person carrying on the regulated activity ofwinding up, a stakeholder pension scheme (which is not anoccupational pension scheme) or personal pension scheme,

is, in each case:

(3) for the benefit of members or beneficiaries who would be eligibleclaimants if they had a claim themselves; and

(4) no more than the amount of the loss suffered by those members orbeneficiaries.

COMP 12A : Special cases Section 12A.2 : Personal representatives,agents and joint claims

12A

R12A.2.1

R12A.2.2

R12A.2.3


12A.2 Personal representatives, agentsand joint claims

Where a person numbers among his claims a claim as the personalrepresentative of another, the FSCS must treat him in respect of that claim asif he were standing in the shoes of that other person.

[Note: this and other rules in this section derive from provisions previously in■ COMP 12.6]

If a claimant has a claim as agent for one or more principals, the FSCS musttreat the principal or principals as having the claim, not the claimant.

If two or more persons have a joint beneficial claim, the claim is to betreated as a claim of the partnership if they are carrying on businesstogether in partnership. Otherwise each of those persons is taken to have aclaim for his share, and in the absence of satisfactory evidence as to theirrespective shares, the FSCS must regard each person as entitled to an equalshare.

COMP 12A : Special cases Section 12A.3 : Collective investmentschemes

12A

R12A.3.1


12A.3 Collective investment schemes

(1) If a claimant has a claim in its capacity as a collective investmentscheme, or anyone who is an operator, depositary, manager or trusteeof such a scheme, and the conditions in (2) are met:

(a) the FSCS must treat the participant or participants as having theclaim, and not the claimant;

(b) ■ COMP 12A.1.6R and ■ COMP 12A.1.7R apply, reading “trustee” as“collective investment scheme, or anyone who is an operator,depositary, manager or trustee of such a scheme”, “trust” as“collective investment scheme” and “beneficiary” as“participant”.

(2) The conditions referred to in (1) are:

(a) the claim is against a relevant person:

(i) acting in the capacity of manager or depositary of thecollective investment scheme; or

(ii) in connection with that person’s managing investments orsafeguarding and administering investments; and

(b) as a result of the matters in (a), a participant in the collectiveinvestment scheme has suffered loss but the participant has noclaim for that loss against that relevant person.

COMP 12A : Special cases Section 12A.4 : Foreign law

12A

R12A.4.1


12A.4 Foreign law

In applying COMP to claims arising out of business done with a branch orestablishment of the relevant person outside the United Kingdom, the FSCSmust interpret references to:

(1) persons entitled as personal representatives, trustees, bare trustees oragents, operators of pension schemes or persons carrying on theregulated activity of winding up pension schemes; or

(2) persons having a joint beneficial claim or carrying on business inpartnership;

as references to persons entitled, under the law of the relevant country orterritory, in a capacity appearing to the FSCS to correspond as nearly as maybe to that capacity.

[Note: this rule derives from a provision previously in ■ COMP 12.6]

COMP 12A : Special cases Section 12A.5 : Claims arising under COMP3.2.4R

12A

R12A.5.1


12A.5 Claims arising under COMP3.2.4R

If a firm has a claim under ■ COMP 3.2.4R, the FSCS must treat each customerof the firm as having the claim for the purposes of calculating compensationwithin ■ COMP 12.

[Note: this rule derives from a provision previously in ■ COMP 12.6]

COMP 12A : Special cases Section 12A.5 : Claims arising under COMP3.2.4R

12A


Compensation

Chapter 13

Funding


COMP 13 : Funding Ann 1

13

[deleted: the provisions in relation to the funding of the FinancialServices Compensation Scheme are set out in FEES 6 (Financial ServicesCompensation Scheme Funding)]

■ Release 27 ● Apr 2018 www.handbook.fca.org.uk COMP 13 Ann 1/1

COMP 13 : Funding Ann 1

13

■ Release 27 ● Apr 2018www.handbook.fca.org.ukCOMP 13 Ann 1/2

Compensation

Chapter 14

Participation by EEA Firms


COMP 14 : Participation by EEA Section 14.1 : Application and PurposeFirms

14

R14.1.1

R14.1.2

G14.1.3

G14.1.4




This chapter also applies to an incoming EEA firm which is a MiFIDinvestment firm , an IMD insurance intermediary, a UCITS managementcompany, an MCD mortgage credit intermediary or an AIFM.

Purpose......................................................................................................This chapter provides supplementary rules and guidance, and contains abroad summary, in guidance, of FSCS cover, for an incoming EEA firm whichis an IMD insurance intermediary, a MiFID investment firm, a UCITSmanagement company, an MCD mortgage credit intermediary or an AIFM. Itreflects in part the implementation of the Investor Compensation Directiveand UCITS Directive.

(1) An incoming EEA firm, which is an IMD insurance intermediary, anMCD mortgage credit intermediary or a MiFID investment firm is nota participant firm in relation to its passported activities unless it"tops-up" into the compensation scheme. This reflects section 213(10)of the Act (The compensation scheme) and regulation 2 of theElecting Participants Regulations (Persons not to be regarded asrelevant persons). If an incoming EEA firm also carries on non-passported activities for which the compensation scheme providescover, it will be a participant firm in relation to those activities andwill be covered by the compensation scheme for those activities in theusual way.

(2) Whether an incoming EEA firm which is an EEA UCITS managementcompany is a participant firm in relation to its passported activitiesdepends on the nature of its activities. In so far as it carries on theactivities of managing investments (other than collective portfoliomanagement), advising on investments or safeguarding andadministering investments, it is not a participant firm unless it "tops-up" into the compensation scheme and it may only obtain top-upcover if it carries on those activities from a branch in the UnitedKingdom. To the extent that such a firm provides collective portfoliomanagement services for a UCITS scheme from a branch in the UnitedKingdom or under the freedom to

http://www.legislation.gov.uk/ukpga/2000/8/section/213/2011-07-01#section-213-10

COMP 14 : Participation by EEA Section 14.1 : Application and PurposeFirms

14

R14.1.4A

G14.1.5

G14.1.6


provide cross border services, it is a participant firm in respect ofthose services.

For an incoming EEA firm which is an AIFM, the question of whether it is aparticipant firm for its passported activities depends on the type of activitiesit carries on under that passport. If it manages an authorised AIF from abranch in the UK or under the freedom to provide cross-border services, it isa participant firm for that activity. If it manages an unauthorised AIF, orprovides the services in article 6(4) of AIFMD from a branch in the UK or on across-border services basis, it is not a participant firm for that activity;however, it may choose to obtain top-up cover for those activities if carriedon from a branch in the UK.

In relation to an incoming EEA firm's passported activities, its Home Statecompensation scheme must provide compensation cover in respect ofbusiness within the scope of the Investor Compensation Directive, article6(3)of the UCITS Directive and article 6(4) of AIFMD, whether that business iscarried on from a UK branch or on a cross border services basis. Insurancemediation activity is not within the scope of the Investor CompensationDirective.

If there is no cover provided by the incoming EEA firm's Home State or thescope and/or level of cover is less than that provided by the compensationscheme, this chapter enables the firm to obtain cover or 'top-up' cover fromthe compensation scheme for its passported activities carried on from a UKbranch, up to the compensation scheme's limits (set out in ■ COMP 10). Thisreflects section 214(5) of the Act (General) and regulation 3 of the ElectingParticipants Regulations (Persons who may elect to participate). If the firm'tops up' and then becomes insolvent, the Home State compensation schemewill pay compensation up to the limit and scope of the Home Statecompensation scheme, with the FSCS paying compensation for the additionalamount in accordance with the provisions in this sourcebook (■ COMP 12.4.1 Rand ■ COMP 12.4.4 R).

http://www.legislation.gov.uk/ukpga/2000/8/section/214/2001-12-01#section-214-5

COMP 14 : Participation by EEA Section 14.2 : Obtaining top-up coverFirms

14

R14.2.1

R14.2.2

G14.2.3

R14.2.4


14.2 Obtaining top-up cover

An incoming EEA firm may, by notice in writing to the FSCS, elect to receivetop-up cover from the compensation scheme if it falls within one of thecategories prescribed in regulation 3 of the Electing Participants Regulations(Persons who may elect to participate).

An election under ■ COMP 14.2.1 R takes effect on the date when the FSCSnotifies the incoming EEA firm that its election has been accepted.

A notice under ■ COMP 14.2.1 R should include details confirming that theincoming EEA firm falls within a prescribed category. In summary:

(1) the firm must be:

(a) [deleted]

(b) an IMD insurance intermediary; or

(c) a MiFID investment firm; or

(d) a UCITS management company that carries on the activities ofmanaging investments (other than collective portfoliomanagement), advising on investments or safeguarding andadministering investments;

(e) an AIFM that carries on AIFM management functions for anunauthorised AIF; or

(f) an AIFM that provides the services in article 6(4) of AIFMD;

(g) an MCD mortgage credit intermediary

(2) the firm must have established a branch in the United Kingdom inthe exercise of an EEA right; and

(3) the scope and/or level of cover provided by the firm's Home Statecompensation scheme must be less than that provided by thecompensation scheme.

When the FSCS accepts an application, it must allocate the incoming EEAfirmto the contribution group (or groups) which seems to the FSCS to be mostappropriate, taking into account the nature of the business for which theincoming EEA firm is seeking cover from the compensation scheme.

COMP 14 : Participation by EEA Section 14.2 : Obtaining top-up coverFirms

14

R14.2.5


The FSCS must put in place and publish procedures to enable an appeal byan incoming EEA firm against a rejection by the FSCS of an election toreceive top-up cover or a decision to allocate an incoming EEA firm, once thefirm's election has been accepted, to a particular contribution group. Suchprocedures must satisfy the minimum requirements of procedural fairnessand comply with the European Convention on Human Rights.

COMP 14 : Participation by EEA Section 14.3 : Co-operation between theFirms FSCS and Home State compensation

schemes

14

R14.3.1


14.3 Co-operation between the FSCSand Home State compensationschemes

Where an incoming EEA firm obtains top-up cover under ■ COMP 14.2, theFSCS must co-operate with that firm's Home State compensation scheme. Inparticular, the FSCS must seek to establish with that firm's Home Statecompensation scheme appropriate procedures for the payment ofcompensation to claimants, following the principles set out in Annex II of theInvestor Compensation Directive.

COMP 14 : Participation by EEA Section 14.4 : Ending top-up coverFirms

14

R14.4.1

R14.4.2

R14.4.3

R14.4.4

R14.4.4A

R14.4.4B

R14.4.5

R14.4.6


14.4 Ending top-up cover

FSCS terminating top-up cover......................................................................................................The FSCS must terminate an incoming EEA firm's top-up cover where it hasascertained that the conditions in ■ COMP 14.2.1 R are no longer satisfied.

If an incoming EEA firm which has top-up cover fails to observe any of therules in this sourcebook which apply to participant firms, the FSCS mustnotify the FCA and the incoming EEA firm's Home State regulator.

In cases where ■ COMP 14.4.2 R applies, the FSCS must co-operate with theincoming EEA firm's Home State regulator so that appropriate measures canbe taken to ensure that the incoming EEA firm meets its obligations underthis sourcebook.

[deleted]

If the incoming EEA firm fails to meet its obligations for a period of twelvemonths following the notice, the FSCS may, subject to obtaining the consentof the incoming EEA firm's Home State regulator, terminate its top-up cover.Notwithstanding the termination of top-up cover under this rule, cover willcontinue for protected investment business transacted before thattermination.

Resignation of an EEA firm from the compensation scheme......................................................................................................An incoming EEA firm which has top-up cover may terminate that top-upcover by giving six months' notice in writing to the FSCS.

Notice to customers and the FSCS......................................................................................................When an incoming EEA firm's top-up cover comes to an end under■ COMP 14.4.1 R, ■ COMP 14.4.4 R or ■ COMP 14.4.5 R, it must:

(1) inform all the clients of its UK branch no later than six weeks afterthe date that its participation ends that they are no longer protected(or, if appropriate, of the more limited protection provided) by the

COMP 14 : Participation by EEA Section 14.4 : Ending top-up coverFirms

14

R14.4.7

R14.4.8


compensation scheme, and of the level of compensation which is thenavailable to them; and

(2) within two months, notify the FSCS whether it has done so.

If an incoming EEA firm fails to comply with ■ COMP 14.4.6R (1), the FSCS mustinform the firm's Home State regulator of that fact.

The FSCS must bring the ending of an incoming EEA firm's top-up cover tothe attention of the incoming EEA firm's clients by means of a public notice.

COMP 14 : Participation by EEA Section 14.5 : EEA UCITS managementFirms companies

14

R14.5.1


14.5 EEA UCITS managementcompanies

Where an EEA UCITS management company provides collective portfoliomanagement services for a UCITS scheme from a branch in the UnitedKingdom, or under the freedom to provide cross border services, the FSCSmust allocate the firm to the class or classes which seems to the FSCS to bemost appropriate, taking into account the nature of the firm's businessactivities.

COMP 14 : Participation by EEA Section 14.5 : EEA UCITS managementFirms companies

14


COMP Transitional Provisions

Compensation

COMP TP 1Transitional Provisions

(1) (2) (3) (4) (5) (6)

Material to Transitional Provision Transitional Handbookwhich the provision: Provisions:transitional dates in coming intoprovision force forceapplies

1 COMP 5 R Protected claims Indefinitely Com-mencement

(1) [deleted]

(2) [deleted]

(3) A claim in connection withprotected investment businessincludes a claim in respect ofa pending application.

(4) Where the claim is in respectof a pending application, theFSCS must apply the rules ofthe relevant former scheme,as they applied to the defaultbefore commencement.

(5) The rules of each investmentbusiness compensationscheme are amended so thatreferences to the person man-aging the scheme are re-placed by references to theFSCS.

(6) [deleted]

(7) [deleted]

(8) Where the default occursafter commencement, aclaim in connection withprotected investmentbusiness includes a claimthat could have beenentertained under an in-vestment business com-pensation scheme (pro-vided that the personmaking the claim hasnot also made a pending

■ Release 27 ● Apr 2018 www.handbook.fca.org.uk COMP TP 1/1


(1) (2) (3) (4) (5) (6)


application arising out ofthe same set of facts).

2 COMP 13.5 R ExpiredandCOMP13.6

3 COMP 13.4.6 R ExpiredR andCOMP13.6.7 R

4 COMP 13.5.8 R ExpiredR

5 COMP 6.2.1 R R [deleted]

6 COMP 6.2.1 R G [deleted]

7 COMP 6.2.1 R G [deleted]

8 Amend- R [deleted]ments in-troducedby the Com-pensationSourcebook(Amend-ment No.2)Instrument2003.

9 COMP 13.6.8 R ExpiredR

10 COMP 5.7.1 R [deleted]R, COMP13.4.7 R andCOMP 13.6.9R

11 FEES 6.3.1 R, R [deleted]FEES 6.3.22 R,FEES 6.4.8 R,FEES 6.4.6 R,FEES 6.5.1 Rand FEES6.5.6 R

12 FEES 6.5.7 R R [deleted](4), FEES6.3.22 R,FEES 6.4.6 R,FEES 6.4.8 R,FEES 6.5.1 R,and FEES6.5.6 R

13 FEES 6.5.7 R R [deleted](4), FEES6.5.10 R, and

■ Release 27 ● Apr 2018www.handbook.fca.org.ukCOMP TP 1/2


(1) (2) (3) (4) (5) (6)


FEES 6.5.13 R(2)

14 FEES 6.5.7 R [deleted](5), FEES6.5.11 R, andFEES 6.5.13 R(2)

15 COMP 5.4.4 R R [deleted](4)(a) andCOMP 5.4.4 R(4)(b)

16 COMP 10.2.3 R [deleted]R

17 Amend- R Provisions and definitions arising out From 7 Oc- 7 Octoberments in- of (2) only apply to defaults on or october 2008 2008troduced curring after 7 October 2008 indefinitelyby the Com-pensationSourcebook(Amend-ment No 8)Instrument2008

18 COMP 10.2.3 R[deleted]R

19 Amend- R Provisions and definitions arising out From 1 Jan- 1 Januaryments to of (2) only apply to defaults on or oc- uary 2010 2010COMP 10.2.3 curring after 1 January 2010. indefinitelyR intro-duced bythe Finan-cial ServicesCompensa-tionScheme(LimitsAmend-ment) In-strument2009

20 COMP 4.3.1 R R [deleted]

21 COMP 17.3 R [deleted]and COMP17.2.7 R

22 COMP 17.3 R [deleted]

23 COMP R [deleted]17.3.10 Rand COMP17.3.12 R

24 COMP 10.2.3 R [deleted]R



(1) (2) (3) (4) (5) (6)


25 The amend- R The changes referred to in (2) made From 31 De- From 31 De-ment of all by the Financial Services Compensa- cember cemberreferences tion Scheme (Banking Compensation 2010 in- 2010in COMP Reform) Instrument 2009 do not ap- definitely(other than ply in relation to a claim against ain the head- relevant person that was in defaulting in re- before 31 December 2010.spect ofCOMP 12.2.4R) to “over-all netclaim” to“overallclaim”

26 COMP 12.3.1 R [deleted]R and COMP15.1.12 R

27 COMP 4.2.2 R The changes referred to in (2), made From 1 Oc- From 1 Oc-R(9) by the Compensation Sourcebook tober 2011 tober 2011

(Occupational Pension Scheme indefinitelyTrustees) Instrument 2011 do not ap-ply in relation to a claim against arelevant person that was in defaultbefore 1 October 2011.


29 COMP 17 R [deleted]

30 COMP 17.3 R [deleted]and COMP17.2.7 R


32 COMP R [deleted]17.3.10 Rand COMP17.3.12 R

33 Amend- R The changes referred to in (2) do not From 1 Oc- From 1 Oc-ments in- apply in relation to a claim against a tober 2012 tober 2012troduced relevant person that was in default indefinitelyby Annex A before 1 October 2012. Notwithstand-and Part 1 ing the above the changes to COMPof Annex B 12.2.10 R apply irrespective of whenof the Com- the default occurred.pensationSourcebook(Amend-ment No 9)Instrument2012.

34 Amend- R The changes referred to in (2) do not From 13 De- From 13 De-ments in- apply in relation to a claim against a cember cembertroduced relevant person that was in default 2013 in- 2013by the Com- before 13 December 2013. definitelypensation



(1) (2) (3) (4) (5) (6)


Sourcebook(Invest-ments byLarge Un-incorpor-ated Asso-ciationsand CertainLarge Part-nerships)Instrument2013

35 All the R The compensation scheme does not From 21 Not ap-rules and provide cover for claims in respect of March 2016 plicableguidance in any mortgage mediation activity re- indefinitelyCOMP ap- lating to a second charge regulatedplicable to mortgage contract if:protectedhome fin- (1) the relevant person was in de-ance fault before 21 March 2016; ormediation.

(2) the basis for the claim arose be-fore 21 March 2016.

35 Amend- R[deleted]ments in-

troducedby the Com-pensationSourcebook(Large un-incorpor-ated associ-ations) In-strument2013

36 COMP 17.2.1 R[deleted]R and COMP

17.2.3 R

37 COMP R The rules referred to in (2) do not ap- From 29 Ap- 29 April10.2.3R(2), ply in relation to a claim against a ril 2016 in- 2016(3) and (4) relevant person, or against a suc- definitely

cessor, that was in default before 29April 2016. Instead, COMP 10.2.3R(5)will continue to apply to such claims.

38 COMP R The changes referred to in (2) do not From 29 Ap- 29 April4.2.2R(4), apply to a claim against a relevant ril 2016 in- 2016COMP person, or against a successor, that definitely4.2.2R(9) was in default before 29 April 2016.and COMP12.6.2AR



(1) (2) (3) (4) (5) (6)


39 Amend- R Where a claim is against a successor From 29 Ap- 29 Aprilments in- that is not an authorised person, pro- ril 2016 in- 2016troduced visions and definitions arising out of definitelyby the Com- (2) only apply if the default occurspensation on or after 29 April 2016 and theSourcebook transfer, under which the successor(Amend- assumed responsibility for liabilitiesment No arising from acts or omissions of the10) Instru- relevant person, occurred on or afterment 2016 1 April 2013.

39A Amend- R The changes referred to in (2) do not From 3 Jan- 3 Januaryments in- apply in relation to a claim against a uary 2018 2018troduced recognised investment exchange, or indefinitelyby the Fin- against a successor, arising from actsancial Ser- or omissions before 3 January 2018.vices Com-pensationScheme(Extensionof Scope toRecognisedInvestmentExchanges)Instrument2017

40 Amend- R The changes referred to in column From 1 Ap- 1 Aprilments in- (2) do not apply in relation to a ril 2018 in- 2018troduced claim against a relevant person, or definitelyby the Fin- against a successor, that was in de-ancial Ser- fault before 1 April 2018.vices Com-pensationScheme(Fundingand Scope)Instrument2017


COMP Schedule 1Record-keeping requirements

Compensation

Schedule 1Record-keeping requirements

Sch 1.1 G

1. The aim of the guidance in the following able is to give the reader a quick overallview of the relevant record keeping requirements. The Rules listed below apply onlyto FSCS (the scheme manager).

2. It is not a complete statement of those requirements and should not be relied uponas it were.

Sch 1.2 G

Handbook Contents of When record Retentionreference Subject of record record must be made period

FEES 6.3.14 R FSCS funding Full details of the Ongoing re- N/Amovement of quirement.funds within sub-schemes.

[deleted]

[deleted]

■ Release 27 ● Apr 2018 www.handbook.fca.org.uk COMP Sch 1/1

COMP Schedule 1Record-keeping requirements

■ Release 27 ● Apr 2018www.handbook.fca.org.ukCOMP Sch 1/2

COMP Schedule 2Notification requirements

Compensation

Schedule 2Notification requirements

Sch 2.1 G

1. The aim of the guidance in the following table is to give the reader a quick overallview of the relevant requirements for notification and reporting. In all cases, otherthan those concerning Chapter 14 and the Transitional Provisions, the notificationrules in COMP apply only to the FSCS (the scheme manager).

2. It is not a complete statement of those requirements and should not be relied on asif it were.

Sch 2.2 G

Handbook Matter to be Contents of noti- Trigger event Timereference notified fication allowed

COMP 2.2.5G Annual Report Not specified in End of Financial Not speci-COMP - see Mem- Year fied inorandum of Un- COMP (seederstanding MoU)(MoU) betweenthe FCA and theFSCS

COMP 2.2.7R Default of relev- Not specified - al- default of a relev- Not speci-ant person or though the FSCS ant person or fied - butsuccessor must take appro- successor as soon as

priate steps to en- practicablesure claimants after de-are informed terminingabout how they defaultcan claim com-pensation

FEES 6.2.1AR Right to exemp- Notice that firm If it does not, or None speci-tion for specific does not conduct if it ceases to, fiedcosts and com- business that conduct business though ex-pensation costs could give rise to with persons eli- emptionlevy a claim on the gible to claim on generally

FSCS and has no the FSCS, unless only takesreasonable it has already effect from

likelihood of do- given such notice the date ofing so receipt of

notice bythe FSCS

FEES 6.2.4 R Loss of right to Statement that Firm loses the As soon asseek exemption firm no longer right to claim the reasonablyfrom specific qualifies for ex- exemption. practicablecosts & com- emption because




pensation costs it carries on busi-levy ness with persons

eligible to claimon FSCS

FEES 6.5.13 R Levy base for par- The contribution The end of the By end Feb-ticipant firm groups to which calendar year ruary or

the participant (the occasion of the date re-firm belongs. The 31 December quested bytotal amount of every year begin- the FCAbusiness (meas- ning with 31 De- where theured in accord- cember 2001) firm be-

ance with the ap- comes apropriate tariff participantbases, which it firm part

conducted as at way31 December of through

the previous the finan-year) cial year

FEES 6.7 Participant firms Amount of levy The decision by 30 days be-compensation payable by the the FSCS that it fore thelevy for the finan- participant firm must impose a levy iscial year levy payable

COMP 14.2.1R Application by That firm is quali- The firm's de- N/Aeligible inward fying incoming cision that itpassporting EEA EEA firm. The wishes to obtainfirm to obtain sub-scheme(s) the top-up cover into

top-up cover into firm wishes to the UK scheme.compensation participate in.

scheme Confirmationthat the level or

scope of cover of-fered by its homestate scheme(s) is

less than thatavailable in the

UK.

COMP 14.4.5R Termination of Statement that Decision by firm 6 monthstop-up cover incoming EEA to resign from notice

firm is terminat- FSCSing top-up cover

COMP 14.4.6R Termination of in- The firm's resig- Termination of No laterward passporting nation from the firm's top-up than sixEEA firm's top-up compensation cover weeks aftercover into com- scheme and the the end of

pensation level of com- the firmsscheme pensation avail- participa-

able to clients of tion in com-the firm's UK pensation

branch following schemeits decision to

resign from FSCS


COMP Schedule 3Fees and other required payments

Compensation

Schedule 3Fees and other required payments

Sch 3.1 G

The rules in FEES 6 give FSCS (the scheme manager) the power to raise levies on participantfirms in order to meet its expenses. The rules in FEES 6 do not specify the amount of anylevy but do specify how a participant firm's share of a levy is to be calculated and any limiton the amount leviable by the FSCS is a particular period.


COMP Schedule 3Fees and other required payments


COMP Schedule 4Powers Exercised

Compensation

Schedule 4Powers Exercised

Sch 4.1 G[deleted]

Sch 4.2 G[deleted]

Sch 4.3 G[deleted]


COMP Schedule 4Powers Exercised


COMP Schedule 5Rights of action for damages

Compensation

Schedule 5Rights of action for damages

Sch 5.1 G

1. The table below sets out the rules in COMP, contravention of which by an authorisedperson may be actionable under section 138D of the Act (Actions for damages) by aperson who suffers loss as a result of the contravention.

2. If a "yes" appears in the column headed "For private person?", the rule may be ac-tionable by a "private person" under Section 138D unless a "yes" appears in the col-umn headed "Removed". A "yes" in the column headed "Removed" indicates thatthe FCA has removed the right of action under Section 138D(3) of the Act. If so, a ref-erence to the rule in which it is removed is also given.

3. In accordance with the Financial Services and Markets Act 2000 (Rights of Action) Re-gulations 2001 (SI 2001/2256) a "private person" is:

i any individual, except when acting in the course of carrying on a regulated ac-tivity; and

ii any person who is not an individual, except when acting in the course of carry-ing on business of any kind;

but does not include a government, local authority or an international organisation.

4. The column headed "For other person?" indicates whether the rule is actionable bya person other than a private person, in accordance with those Regulations. If so, anindication of the type of person by whom the rule is actionable is given.

5. The vast majority of rules in COMP are rules to which the FSCS is subject. No right ofaction arises under section 138D for breach of these rules, as the FSCS is not an au-thorised person.

Sch 5.2 G

Section/ For private For otherChapter/Appendix Annex Paragraph person? Removed person?

COMP 1 5 8 No Yes - COMP No1.5.12R

COMP Yes No No14.4.6R




COMP Schedule 5Rights of action for damages


COMP Schedule 6Rules that can be waived

Compensation

Schedule 6Rules that can be waived

Sch 6.1 G[deleted]

Sch 6.1A G

As a result of section 138A of the Act (Modification or waiver of rules) the FCA has powerto waive all its rules, other than rules made under section 137O (Threshold condition code),section 247 (Trust scheme rules), section 248 (Scheme particular rules), section 261I (Contrac-tual scheme rules) or section 261J (Contractual scheme particulars rules) of the Act. How-ever, if the rules incorporate requirements laid down in European directives, it will not bepossible for the FCA to grant a waiver that would be incompatible with the United King-dom's responsibilities under those directives.


http://www.legislation.gov.uk/ukpga/2000/8/section/138A/2013-04-01

COMP Schedule 6Rules that can be waived


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